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PROSPECTUS August 1, 1997
As Revised November 15, 1997
Dreyfus A Bonds Plus, Inc.
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DREYFUS A BONDS PLUS, INC. (THE "FUND") IS AN OPEN-END, DIVERSIFIED,
MANAGEMENT INVESTMENT COMPANY, KNOWN AS A MUTUAL FUND. THE FUND'S INVESTMENT
OBJECTIVE IS TO PROVIDE YOU WITH THE MAXIMUM AMOUNT OF CURRENT INCOME TO THE
EXTENT CONSISTENT WITH THE PRESERVATION OF CAPITAL AND THE MAINTENANCE OF
LIQUIDITY.
THE FUND INVESTS PRINCIPALLY IN DEBT OBLIGATIONS OF CORPORATIONS, THE
U.S. GOVERNMENT AND ITS AGENCIES AND INSTRUMENTALITIES, AND MAJOR U.S.
BANKING INSTITUTIONS. AT LEAST 80% OF THE FUND'S PORTFOLIO IS INVESTED IN
BONDS RATED AT LEAST A BY MOODY'S INVESTORS SERVICE, INC. OR STANDARD &
POOR'S RATINGS GROUP.
YOU CAN INVEST, REINVEST OR REDEEM SHARES AT ANY TIME WITHOUT CHARGE
OR PENALTY.
THE FUND PROVIDES FREE REDEMPTION CHECKS, WHICH YOU CAN USE IN
AMOUNTS OF $500 OR MORE FOR CASH OR TO PAY BILLS. YOU CONTINUE TO EARN INCOME
ON THE AMOUNT OF THE CHECK UNTIL IT CLEARS. YOU CAN PURCHASE OR REDEEM SHARES
BY TELEPHONE USING DREYFUS TELETRANSFER.
THE DREYFUS CORPORATION PROFESSIONALLY MANAGES THE FUND'S PORTFOLIO.
THIS PROSPECTUS SETS FORTH CONCISELY INFORMATION ABOUT THE FUND THAT
YOU SHOULD KNOW BEFORE INVESTING. IT SHOULD BE READ AND RETAINED FOR FUTURE
REFERENCE.
THE STATEMENT OF ADDITIONAL INFORMATION, DATED AUGUST 1, 1997, WHICH
MAY BE REVISED FROM TIME TO TIME, PROVIDES A FURTHER DISCUSSION OF CERTAIN
AREAS IN THIS PROSPECTUS AND OTHER MATTERS WHICH MAY BE OF INTEREST TO SOME
INVESTORS. IT HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION AND
IS INCORPORATED HEREIN BY REFERENCE. THE SECURITIES AND EXCHANGE COMMISSION
MAINTAINS A WEB SITE (HTTP://WWW.SEC.GOV) THAT CONTAINS THE STATEMENT OF
ADDITIONAL INFORMATION, MATERIAL INCORPORATED BY REFERENCE, AND OTHER
INFORMATION REGARDING THE FUND. FOR A FREE COPY OF THE STATEMENT OF
ADDITIONAL INFORMATION, WRITE TO THE FUND AT 144 GLENN CURTISS BOULEVARD,
UNIONDALE, NEW YORK 11556-0144, OR CALL 1-800-645-6561. WHEN TELEPHONING, ASK
FOR OPERATOR 144.
MUTUAL FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
AGENCY. MUTUAL FUND SHARES INVOLVE CERTAIN INVESTMENT RISKS, INCLUDING THE
POSSIBLE LOSS OF PRINCIPAL. THE NET ASSET VALUE OF FUNDS OF THIS TYPE WILL
FLUCTUATE FROM TIME TO TIME.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
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TABLE OF CONTENTS
Page
Annual Fund Operating Expenses.......... 3
Condensed Financial Information......... 4
Description of the Fund................. 5
Management of the Fund.................. 7
How to Buy Shares....................... 8
Shareholder Services.................... 10
Page
How to Redeem Shares.................... 13
Shareholder Services Plan............... 15
Dividends, Distributions and Taxes...... 15
Performance Information................. 17
General Information..................... 17
Appendix................................ 19
[This Page Intentionally Left Blank]
[Page 2]
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average daily net assets)
<S> <C>
Management Fees........................................................................... .65%
Other Expenses ........................................................................... .31%
Total Fund Operating Expenses............................................................. .96%
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
EXAMPLE: 1 YEAR 3 YEARS 5 YEARS 10 YEARS
You would pay the following expenses on
a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the
end of each time period: $10 $31 $53 $118
</TABLE>
THE AMOUNTS LISTED IN THE EXAMPLE SHOULD NOT BE CONSIDERED AS REPRESENTATIVE
OF PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY
BE GREATER OR LESS THAN THOSE INDICATED. MOREOVER, WHILE THE EXAMPLE ASSUMES
A 5% ANNUAL RETURN, THE FUND'S ACTUAL PERFORMANCE WILL VARY AND MAY RESULT IN
AN ACTUAL RETURN GREATER OR LESS THAN 5%.
The purpose of the foregoing table is to assist you in understanding
the costs and expenses borne by the Fund, the payment of which will reduce
investors' annual return. You can purchase Fund shares without charge
directly from the Fund's distributor; you may be charged a fee if you effect
transactions in Fund shares through a securities dealer, bank or other
financial institution. See "Management of the Fund," "How to Buy Shares" and
"Shareholder Services Plan."
[Page 3]
CONDENSED FINANCIAL INFORMATION
The information in the following table has been audited by Ernst &
Young LLP, the Fund's independent auditors, whose report thereon appears in
the Statement of Additional Information. Further financial data and related
notes are included in the Statement of Additional Information, available upon
request.
FINANCIAL HIGHLIGHTS
Contained below is per share operating performance data for a share
of common stock outstanding, total investment return, ratios to average net
assets and other supplemental data for each year indicated. This information
has been derived from the Fund's financial statements.
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
_______________________________________________________________________________________________
PER SHARE DATA: 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997
______ ______ ______ ______ ______ ______ ______ ______ ______ _______
Net asset value,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
beginning of year $15.11 $13.78 $13.24 $13.45 $13.65 $14.35 $15.43 $14.38 $13.75 $14.47
______ ______ ______ ______ ______ ______ ______ ______ ______ _______
INVESTMENT OPERATIONS:
Investment income_net 1.21 1.19 1.18 1.15 1.11 1.05 .98 .94 .92 .88
Net realized and unrealized
gain (loss)
on investments...... (1.10) (.53) .21 .20 .70 1.29 (.46) (.56) .73 (.34)
______ ______ ______ ______ ______ ______ ______ ______ ______ _______
TOTAL FROM INVESTMENT OPERATIONS .11 .66 1.39 1.35 1.81 2.34 .52 .38 1.65 .54
______ ______ ______ ______ ______ ______ ______ ______ ______ _______
DISTRIBUTIONS:
Dividends from investment
income-net.......... (1.22) (1.20) (1.18) (1.15) (1.11) (1.05) (.99) (.94) (.93) (.88)
Dividends from net
realized gain on
investments......... (.22) __ __ __ __ (.21) (.58) (.07) __ __
______ ______ ______ ______ ______ ______ ______ ______ ______ _______
TOTAL DISTRIBUTIONS. (1.44) (1.20) (1.18) (1.15) (1.11) (1.26)(1.57) (1.01) (.93) (.88)
______ ______ ______ ______ ______ ______ ______ ______ ______ _______
Net asset value,
end of year $13.78 $13.24 $13.45 $13.65 $14.35 $15.43 $14.38 $13.75 $14.47 $14.13
====== ====== ======= ====== ======= ====== ======= ======= ======= =======
TOTAL INVESTMENT RETURN 1.23% 5.03% 10.66% 10.60% 13.75% 17.09% 3.09% 3.01% 12.12% 3.88%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average
net assets.......... .88% .94% .86% .85% .88% .93% .90% .99% .93% .96%
Ratio of net investment income
to average net assets 8.87% 8.90% 8.52% 8.59% 7.88% 7.07% 6.30% 6.89% 6.32% 6.12%
Portfolio Turnover Rate 49.03% 65.72% 39.77% 25.90% 66.82% 81.15% 93.67% 172.60% 165.50% 415.69%
Net Assets, end of year
(000's omitted)..... $254,333 $262,367 $299,783 $339,935 $446,869 $574,431 $593,615 $539,140 $598,551 $571,580
Further information about the Fund's performance is contained in the
Fund's annual report, which may be obtained without charge by writing to the
address or calling the number set forth on the cover page of this Prospectus.
</TABLE>
<TABLE>
<CAPTION>
DEBT OUTSTANDING
YEAR ENDED MARCH 31, 1997(1)
_______________________________
PER SHARE DATA:
<S> <C>
Amount of debt outstanding at end of year (in thousands)...................... --
Average amount of debt outstanding throughout year (in thousands)(2).......... $422
Average number of shares outstanding throughout year (in thousands)(3)........ 41,624
Average amount of debt per share throughout year.............................. $ .01
(1)From April 1, 1987 through March 31, 1996, the Fund had no outstanding debt.
(2)Based upon daily outstanding borrowings.
(3)Based upon month-end balances.
</TABLE>
[Page 4]
DESCRIPTION OF THE FUND
INVESTMENT OBJECTIVE
The Fund's investment objective is to provide you with the maximum
amount of current income to the extent consistent with the preservation of
capital and the maintenance of liquidity. The Fund's investment objective
cannot be changed without approval by the holders of a majority (as defined
in the Investment Company Act of 1940, as amended (the "1940 Act")) of the
Fund's outstanding voting shares. There can be no assurance that the Fund's
investment objective will be achieved.
MANAGEMENT POLICIES
The Fund invests principally in debt obligations of corporations, the
U.S. Government and its agencies and instrumentalities, and major U.S.
banking institutions. At least 80% of the value of the Fund's net assets will
consist of obligations of corporations which, at the time of purchase by the
Fund, are rated at least A by Moody's Investors Service, Inc. ("Moody's") or
Standard & Poor's Ratings Group ("S&P"), or determined to be of comparable
quality by The Dreyfus Corporation, and securities issued or guaranteed as to
principal and interest by the U.S. Government or its agencies or
instrumentalities. The Fund may invest up to 20% of the value of its net
assets in corporate obligations rated lower than A, but no lower than B, by
Moody's and S&P. In addition, the Fund will invest no more than 5% of its net
assets in bonds rated Ba or B by Moody's and BB or B by S&P. Obligations
rated Baa by Moody's or BBB by S&P are considered investment grade
obligations which lack outstanding investment characteristics and may have
speculative characteristics as well. See "Investment Considerations and
Risks_Fixed-Income Securities" below, and "Appendix" in the Statement of
Additional Information. The Fund also may invest in mortgage-related
securities, including those with fixed, floating or variable interest rates,
those with interest rates that change based on multiples of changes in a
specified index of interest rates and those with interest rates that change
inversely to changes in interest rates, as well as those that do not bear
interest. In addition, the Fund may invest in asset-backed securities,
municipal obligations and zero coupon securities as described herein. At
least 65% of the value of the Fund's net assets (except when maintaining a
temporary defensive position) will be invested in bonds, debentures and other
debt instruments. The Fund may invest up to 10% of its assets in securities
of foreign issuers. See "Investment Considerations and Risks _ Foreign
Securities"below.
The Fund may invest in money market instruments consisting of U.S.
Government securities, certificates of deposit, time deposits, bankers'
acceptances, short-term investment grade corporate bonds and other short-term
debt instruments, and repurchase agreements, as set forth under "Appendix _
Certain Portfolio Securities _ Money Market Instruments." Under normal
market conditions, the Fund does not expect to have more than 20% of its net
assets invested in money market instruments and does not intend to invest
more than 5% of its assets in any one of these types of instruments. However,
when The Dreyfus Corporation determines that adverse market conditions exist,
the Fund may adopt a temporary defensive posture and invest all of its assets
in money market instruments.
The Fund's annual portfolio turnover rate is not expected to exceed
300% for the current fiscal year. A turnover rate of 100% is equivalent to
the Fund buying and selling all of the securities in its portfolio once in
the course of a year. Higher portfolio turnover rates usually generate
additional brokerage commissions and expenses and the short-term gains
realized from these transactions are taxable to shareholders as ordinary
income. In addition, the Fund may engage in various investment techniques,
such as lending portfolio securities. For a discussion of the investment
techniques and their related risks, see "Appendix_Investment Techniques"
below and "Investment Objective and Management Policies" in the Statement of
Additional Information.
INVESTMENT CONSIDERATIONS AND RISKS
GENERAL _ The net asset value per share of the Fund should be expected to
fluctuate. Investors should consider the Fund as a supplement to an overall
investment program and should invest only if they are
[Page 5]
willing to undertake the risks involved. See "Investment Objective and
Management Policies" in the Statement of Additional Information for a further
discussion of certain risks.
FIXED-INCOME SECURITIES _ Even though interest-bearing securities are
investments which promise a stable stream of income, the prices of such
securities generally are inversely affected by changes in interest rates and,
therefore, are subject to the risk of market price fluctuations. Certain
securities that may be purchased by the Fund, such as those with interest
rates that fluctuate directly or indirectly based on multiples of a stated
index, are designed to be highly sensitive to changes in interest rates and
can subject the holders thereof to extreme reductions of yield and possibly
loss of principal. The values of fixed- income securities also may be
affected by changes in the credit rating or financial condition of the
issuer. Certain securities purchased by the Fund, such as those rated Baa or
lower by Moody's and BBB or lower by S&P, may be subject to such risk with
respect to the issuing entity and to greater market fluctuations than certain
lower yielding, higher rated fixed-income securities. Once the rating of a
portfolio security has been changed, the Fund will consider all circumstances
deemed relevant in determining whether to continue to hold the security. See
"Appendix_Certain Portfolio Securities_Ratings" below and "Appendix" in the
Statement of Additional Information.
MORTGAGE-RELATED SECURITIES _ Mortgage-related securities are complex
derivative instruments, subject to both credit and prepayment risk, and may
be more volatile and less liquid than more traditional debt securities.
Mortgage-related securities are subject to credit risks associated with the
performance of the underlying mortgage properties. Adverse changes in
economic conditions and circumstances are more likely to have an adverse
impact on mortgage-related securities secured by loans on certain types of
commercial properties than on those secured by loans on residential
properties. In addition, these securities are subject to prepayment risk,
although commercial mortgages typically have shorter maturities than
residential mortgages and prepayment protection features. Some mortgage-relate
d securities have structures that make their reactions to interest rate
changes and other factors difficult to predict, making their value highly
volatile. See "Appendix_Certain Portfolio Securities_Mortgage-Related
Securities."
FOREIGN SECURITIES _ The Fund may invest up to 10% of its assets in foreign
securities. Foreign securities markets generally are not as developed or
efficient as those in the United States. Securities of some foreign issuers
are less liquid and more volatile than securities of comparable U.S. issuers.
Similarly, volume and liquidity in most foreign securities markets are less
than in the United States and, at times, volatility of price can be greater
than in the United States.
Because evidences of ownership of such securities usually are held
outside the United States, the Fund will be subject to additional risks which
include possible adverse political and economic developments, seizure or
nationalization of foreign deposits or adoption of governmental restrictions
which might adversely affect or restrict the payment of principal and
interest on the foreign securities to investors located outside the country
of the issuer, whether from currency blockage or otherwise.
Since foreign securities often are purchased with and payable in
currencies of foreign countries, the value of these assets as measured in
U.S. dollars may be affected favorably or unfavorably by changes in currency
rates and exchange control regulations.
USE OF DERIVATIVES _ The Fund may invest in, or enter into, derivatives
("Derivatives"). These are financial instruments which derive their
performance, at least in part, from the performance of an underlying asset,
index or interest rate. The Derivatives the Fund may use include
mortgage-related securities and asset-backed securities. While Derivatives
can be used effectively in furtherance of the Fund's investment objective,
under certain market conditions, they can increase the volatility of the
Fund's net asset value, decrease the liquidity of the Fund's portfolio and
make more difficult the accurate pricing of the Fund's portfolio. See
"Appendix _ Investment Techniques _ Use of Derivatives" below and
"Investment Objective and Management Policies _ Management Policies _
Derivatives"in the Statement of Additional Information.
[Page 6]
SIMULTANEOUS INVESTMENTS _ Investment decisions for the Fund are made
independently from those of the other investment companies advised by The
Dreyfus Corporation. If, however, such other investment companies desire to
invest in, or dispose of, the same securities as the Fund, available
investments or opportunities for sales will be allocated equitably to each
investment company. In some cases, this procedure may adversely affect the
size of the position obtained for or disposed of by the Fund or the price
paid or received by the Fund.
MANAGEMENT OF THE FUND
INVESTMENT ADVISER _ The Dreyfus Corporation, located at 200 Park Avenue,
New York, New York 10166, was formed in 1947 and serves as the Fund's
investment adviser. The Dreyfus Corporation is a wholly-owned subsidiary of
Mellon Bank, N.A., which is a wholly-owned subsidiary of Mellon Bank
Corporation ("Mellon"). As of September 30, 1997, The Dreyfus Corporation
managed or administered approximately $93 billion in assets for approximately
1.7 million investor accounts nationwide.
The Dreyfus Corporation supervises and assists in the overall
management of the Fund's affairs under a Management Agreement with the Fund,
subject to the authority of the Fund's Board in accordance with Maryland law.
The investment decisions of the Fund are made by the Taxable Fixed-Income
Committee of The Dreyfus Corporation, and no person is primarily responsible
for making recommendations to that Committee. The portfolio managers
comprising the Taxable Fixed-Income Committee are identified in the Statement
of Additional Information. The Dreyfus Corporation also provides research
services for the Fund and for other funds advised by The Dreyfus Corporation
through a professional staff of portfolio managers and securities analysts.
Mellon is a publicly owned multibank holding company incorporated
under Pennsylvania law in 1971 and registered under the Federal Bank Holding
Company Act of 1956, as amended. Mellon provides a comprehensive range of
financial products and services in domestic and selected international
markets. Mellon is among the twenty-five largest bank holding companies in
the United States based on total assets. Mellon's principal wholly-owned
subsidiaries are Mellon Bank, N.A., Mellon Bank (DE) National Association,
Mellon Bank (MD), The Boston Company, Inc., AFCO Credit Corporation and a
number of companies known as Mellon Financial Services Corporations. Through
its subsidiaries, including The Dreyfus Corporation, Mellon managed more than
$299 billion in assets as of September 30, 1997, including approximately $102
billion in proprietary mutual fund assets. As of September 30, 1997, Mellon,
through various subsidiaries, provided non-investment services, such as
custodial or administration services, for more than $1.488 trillion in
assets, including approximately $60 billion in mutual fund assets.
For the fiscal year ended March 31, 1997, the Fund paid The Dreyfus
Corporation a monthly management fee at the annual rate of .65 of 1% of the
value of the Fund's average daily net assets. From time to time, The Dreyfus
Corporation may waive receipt of its fees and/or voluntarily assume certain
expenses of the Fund, which would have the effect of lowering the expense
ratio of the Fund and increasing yield to investors. The Fund will not pay
The Dreyfus Corporation at a later time for any amounts it may waive, nor
will the Fund reimburse The Dreyfus Corporation for any amounts it may
assume.
In allocating brokerage transactions, The Dreyfus Corporation seeks
to obtain the best execution of orders at the most favorable net price.
Subject to this determination, The Dreyfus Corporation may consider, among
other things, the receipt of research services and/or the sale of shares of
the Fund or other funds managed, advised or administered by The Dreyfus
Corporation as factors in the selection of broker-dealers to execute
portfolio transactions for the Fund.
The Dreyfus Corporation may pay the Fund's distributor for
shareholder services from The Dreyfus Corporation's own assets, including
past profits but not including the management fee paid by the Fund. The
Fund's distributor may use part or all of such payments to pay securities
dealers, banks or other financial institutions in respect of these services.
[Page 7]
DISTRIBUTOR _ The Fund's distributor is Premier Mutual Fund Services, Inc.
(the "Distributor"), located at 60 State Street, Boston, Massachusetts 02109.
The Distributor's ultimate parent is Boston Institutional Group, Inc.
TRANSFER AND DIVIDEND DISBURSING AGENT AND CUSTODIAN _ Dreyfus Transfer,
Inc., a wholly-owned subsidiary of The Dreyfus Corporation, P.O. Box 9671,
Providence, Rhode Island 02940-9671, is the Fund's Transfer and Dividend
Disbursing Agent (the "Transfer Agent"). Mellon Bank, N.A., One Mellon
Center, Pittsburgh, Pennsylvania 15258, serves as the Fund's Custodian.
HOW TO BUY SHARES
Fund shares are sold without a sales charge. You may be charged a fee
if you effect transactions in Fund shares through a securities dealer, bank
or other financial institution. Stock certificates are issued only upon your
written request. No certificates are issued for fractional shares. The Fund
reserves the right to reject any purchase order. See "Appendix_Additional
Information About Purchases, Exchanges and Redemptions."
The minimum initial investment is $2,500, or $1,000 if you are a
client of a securities dealer, bank or other financial institution which
maintains an omnibus account in the Fund and has made an aggregate minimum
initial purchase for its customers of $2,500. Subsequent investments must be
at least $100. However, the minimum initial investment for Dreyfus-sponsored
Keogh Plans, IRAs, SEP-IRAs and 403(b)(7) Plans with only one participant is
$750, with no minimum for subsequent purchases. Individuals who open an IRA
also may open a non-working spousal IRA with a minimum initial investment of
$250. Subsequent investments in a spousal IRA must be at least $250. The
initial investment must be accompanied by the Account Application. For
full-time or part-time employees of The Dreyfus Corporation or any of its
affiliates or subsidiaries, directors of The Dreyfus Corporation, Board
members of a fund advised by The Dreyfus Corporation, including members of
the Fund's Board, or the spouse or minor child of any of the foregoing, the
minimum initial investment is $1,000. For full-time or part-time employees of
The Dreyfus Corporation or any of its affiliates or subsidiaries who elect to
have a portion of their pay directly deposited into their accounts, the minimu
m initial investment is $50. The Fund reserves the right to offer Fund shares
without regard to minimum purchase requirements to employees participating in
certain qualified or non-qualified employee benefit plans or other programs
where contributions or account information can be transmitted in a manner and
form acceptable to the Fund. The Fund reserves the right to vary further the
initial and subsequent investment minimum requirements at any time. Fund
shares also are offered without regard to the minimum initial investment
requirements through Dreyfus-AUTOMATIC Asset BuilderRegistration Mark,
Dreyfus Government Direct Deposit Privilege or Dreyfus Payroll Savings Plan
pursuant to the Dreyfus Step Program described under "Shareholder Services."
These services enable you to make regularly scheduled investments and may
provide you with a convenient way to invest for long-term financial goals.
You should be aware, however, that periodic investment plans do not guarantee
a profit and will not protect an investor against loss in a declining market.
You may purchase Fund shares by check or wire, or through the Dreyfus
TELETRANSFER Privilege described below. Checks should be made payable to "The
Dreyfus Family of Funds," or, if for Dreyfus retirement plan accounts, to
"The Dreyfus Trust Company, Custodian." Payments to open new accounts which
are mailed should be sent to The Dreyfus Family of Funds, P.O. Box 9387,
Providence, Rhode Island 02940-9387, together with your Account Application.
For subsequent investments, your Fund account number should appear on the
check and an investment slip should be enclosed and sent to The Dreyfus
Family of Funds, P.O. Box 105, Newark, New Jersey 07101-0105. For Dreyfus
retirement plan accounts, both initial and subsequent investments should be
sent to The Dreyfus Trust Company, Custodian, P.O. Box 6427, Providence,
Rhode Island 02940-6427. Neither initial nor subsequent investments should be
made by third party check. Purchase orders may be delivered in person
[Page 8]
only to a Dreyfus Financial Center. THESE ORDERS WILL BE FORWARDED TO THE
FUND AND WILL BE PROCESSED ONLY UPON RECEIPT THEREBY. For the location of the
nearest Dreyfus Financial Center, please call one of the telephone numbers
listed under "General Information."
Wire payments may be made if your bank account is in a commercial
bank that is a member of the Federal Reserve System or any other bank having
a correspondent bank in New York City. Immediately available funds may be
transmitted by wire to The Bank of New York, DDA #8900051868/Dreyfus A Bonds
Plus, Inc., for purchase of Fund shares in your name. The wire must include
your Fund account number (for new accounts, your Taxpayer Identification
Number ("TIN") should be included instead), account registration and dealer
number, if applicable. If your initial purchase of Fund shares is by wire,
please call 1-800-645-6561 after completing your wire payment to obtain your
Fund account number. Please include your Fund account number on the Account
Application and promptly mail the Account Application to the Fund, as no
redemptions will be permitted until the Account Application is received. You
may obtain further information about remitting funds in this manner from your
bank. All payments should be made in U.S. dollars and, to avoid fees and
delays, should be drawn only on U.S. banks. A charge will be imposed if any
check used for investment in your account does not clear. The Fund makes
available to certain large institutions the ability to issue purchase instruct
ions through compatible computer facilities.
Subsequent investments also may be made by electronic transfer of
funds from an account maintained in a bank or other domestic financial
institution that is an Automated Clearing House member. You must direct the
institution to transmit immediately available funds through the Automated
Clearing House to The Bank of New York with instructions to credit your Fund
account. The instructions must specify your Fund account registration and
your Fund account number PRECEDED BY THE DIGITS "1111."
Fund shares are sold on a continuous basis at the net asset value per
share next determined after an order in proper form is received by the
Transfer Agent or other agent. Net asset value per share is determined as of
the close of trading on the floor of the New York Stock Exchange (currently
4:00 p.m., New York time), on each day the New York Stock Exchange is open
for business. Net asset value per share is computed by dividing the value of
the Fund's net assets (i.e., the value of its assets less liabilities) by the
total number of shares outstanding. The Fund's investments are valued
generally by using available market quotations or at fair value which may be
determined by one or more independent pricing services approved by the Fund's
Board. Each pricing service's procedures are reviewed under the general
supervision of the Fund's Board. For further information regarding the
methods employed in valuing the Fund's investments, see "Determination of Net
Asset Value" in the Statement of Additional Information.
For certain institutions that have entered into agreements with the
Distributor, payment for the purchase of Fund shares may be transmitted, and
must be received by the Transfer Agent, within three business days after the
order is placed. If such payment is not received within three business days
after the order is placed, the order may be canceled and the institution
could be held liable for resulting fees and/or losses.
The Distributor may pay dealers a fee of up to .5% of the amount
invested through such dealers in Fund shares by employees participating in
qualified or non-qualified employee benefit plans or other programs where (i)
the employers or affiliated employers maintaining such plans or programs have
a minimum of 250 employees eligible for participation in such plans or
programs, or (ii) such plan's or program's aggregate investment in the
Dreyfus Family of Funds or certain other products made available by the
Distributor to such plans or programs exceeds $1,000,000 ("Eligible Benefit
Plans"). Shares of funds in the Dreyfus Family of Funds then held by Eligible
Benefit Plans will be aggregated to determine the fee payable. The
Distributor reserves the right to cease paying these fees at any time. The
Distributor will pay such fees from its own funds, other than amounts
received from the Fund, including past profits or any other source available
to it.
[Page 9]
Federal regulations require that you provide a certified TIN upon
opening or reopening an account. See "Dividends,
Distributions and Taxes" and the Account Application for further information
concerning this requirement. Failure to furnish a certified TIN to the Fund
could subject you to a $50 penalty imposed by the Internal Revenue Service
("IRS").
DREYFUS TELETRANSFER PRIVILEGE _ You may purchase Fund shares (minimum $500,
maximum $150,000 per day) by telephone if you have checked the appropriate
box and supplied the necessary information on the Account Application or have
filed a Shareholder Services Form with the Transfer Agent. The proceeds will
be transferred between the bank account designated in one of these documents
and your Fund account. Only a bank account maintained in a domestic financial
institution which is an Automated Clearing House member may be so designated.
The Fund may modify or terminate this Privilege at any time or charge a
service fee upon notice to shareholders. No such fee currently is
contemplated.
If you have selected the Dreyfus TELETRANSFER Privilege, you may
request a Dreyfus TELETRANSFER purchase of shares by calling 1-800-645-6561
or, if you are calling from overseas, call 516-794-5452.
SHAREHOLDER SERVICES
FUND EXCHANGES _ You may purchase, in exchange for shares of the Fund, shares
of certain other funds managed or administered by The Dreyfus Corporation, to
the extent such shares are offered for sale in your state of residence. These
funds have different investment objectives which may be of interest to you.
If you desire to use this service, please call 1-800-645-6561 to determine if
it is available and whether any conditions are imposed on its use.
To request an exchange, you must give exchange instructions to the
Transfer Agent in writing or by telephone. Before any exchange, you must
obtain and should review a copy of the current prospectus of the fund into
which the exchange is being made. Prospectuses may be obtained by calling
1-800-645-6561. Except in the case of personal retirement plans, the shares
being exchanged must have a current value of at least $500; furthermore, when
establishing a new account by exchange, the shares being exchanged must have
a value of at least the minimum initial investment required for the fund into
which the exchange is being made. The ability to issue exchange instructions
by telephone is given to all shareholders automatically, unless you check the
applicable "No" box on the Account Application indicating that you
specifically refuse this privilege. The Telephone Exchange Privilege may be
established for an existing account by written request signed by all
shareholders on the account, by a separate signed Shareholder Services Form,
available by calling 1-800-645-6561, or by oral request from any of the
authorized signatories on the account by calling 1-800-645-6561. If you have
established the Telephone Exchange Privilege, you may telephone exchange
instructions (including over The Dreyfus TouchRegistration Mark automated
telephone system) by calling 1-800-645-6561. If you are calling from
overseas, call 516-794-5452. See "How to Redeem Shares _ Procedures." Upon an
exchange into a new account, the following shareholder services and
privileges, as applicable and where available, will be automatically carried
over to the fund into which the exchange is made: Telephone Exchange
Privilege, Check Redemption Privilege, Wire Redemption Privilege, Telephone
Redemption Privilege, Dreyfus TELETRANSFER Privilege, and the
dividend/capital gain distribution option (except for Dreyfus Dividend Sweep)
selected by the investor.
Shares will be exchanged at the next determined net asset value;
however, a sales load may be charged with respect to exchanges into funds
sold with a sales load. If you are exchanging into a fund that charges a
sales load, you may qualify for share prices which do not include the sales
load or which reflect a reduced sales load, if the shares you are exchanging
were: (a) purchased with a sales load, (b) acquired by a previous exchange
from shares purchased with a sales load, or (c) acquired through reinvestment
of dividends or distributions paid with respect to the foregoing categories
of shares. To qualify, at the time of the exchange you must notify the
Transfer Agent. Any such qualification is subject to confirmation of your
holdings through a check of appropriate records. See "Shareholder Services"
in the
[Page 10]
Statement of Additional Information. No fees currently are charged
shareholders directly in connection with exchanges, although the Fund
reserves the right, upon not less than 60 days' written notice, to charge
shareholders a nominal administrative fee in accordance with rules
promulgated by the Securities and Exchange Commission. The Fund reserves the
right to reject any exchange request in whole or in part. See
"Appendix_Additional Information About Purchases, Exchanges and Redemptions."
The availability of Fund Exchanges may be modified or terminated at any time
upon notice to shareholders. See "Dividends, Distributions and Taxes."
DREYFUS AUTO-EXCHANGE PRIVILEGE _ Dreyfus Auto-Exchange Privilege enables
you to invest regularly (on a semi-monthly, monthly, quarterly or annual
basis), in exchange for shares of the Fund, in shares of certain other funds
in the Dreyfus Family of Funds of which you are a shareholder. The amount you
designate, which can be expressed either in terms of a specific dollar or
share amount ($100 minimum), will be exchanged automatically on the first
and/or fifteenth of the month according to the schedule you have selected.
Shares will be exchanged at the then-current net asset value; however a sales
load may be charged with respect to exchanges into funds sold with a sales
load. See "Shareholder Services" in the Statement of Additional Information.
The right to exercise this Privilege may be modified or cancelled by the Fund
or the Transfer Agent. You may modify or cancel your exercise of this
Privilege at any time by mailing written notification to The Dreyfus Family
of Funds, P.O. Box 9671, Providence, Rhode Island 02940-9671. The Fund may
charge a service fee for the use of this Privilege. No such fee currently is
contemplated. For more information concerning this Privilege and the funds in
the Dreyfus Family of Funds eligible to participate in this Privilege, or to
obtain a Dreyfus Auto-Exchange Authorization Form, please call toll free
1-800-645-6561. See "Dividends, Distributions and Taxes."
DREYFUS-AUTOMATIC ASSET BUILDERRegistration Mark _ Dreyfus-Automatic Asset
Builder permits you to purchase shares (minimum of $100 and maximum of
$150,000 per transaction) at regular intervals selected by you. Fund shares
are purchased by transferring funds from the bank account designated by you.
At your option, the bank account designated by you will be debited in the
specified amount, and Fund shares will be purchased, once a month, on either
the first or fifteenth day, or twice a month, on both days. Only an account
maintained at a domestic financial institution which is an Automated Clearing
House member may be so designated. To establish a Dreyfus-Automatic Asset
Builder account you must file an authorization form with the Transfer Agent.
You may obtain the necessary authorization form by calling 1-800-645-6561.
You may cancel this Privilege or change the amount of your purchase at any
time by mailing written notification to The Dreyfus Family of Funds, P.O. Box
9671, Providence, Rhode Island 02940-9671, or, if for Dreyfus retirement plan
accounts, to The Dreyfus Trust Company, Custodian, P.O. Box 6427, Providence,
Rhode Island 02940-6427. The notification will be effective three business
days following receipt. The Fund may modify or terminate this Privilege at
any time or charge a service fee upon notice to shareholders. No such fee
currently is contemplated.
DREYFUS GOVERNMENT DIRECT DEPOSIT PRIVILEGE _ Dreyfus Government Direct
Deposit Privilege enables you to purchase shares (minimum of $100 and maximum
of $50,000 per transaction) by having Federal salary, Social Security, or
certain veterans', military or other payments from the Federal government
automatically deposited into your Fund account. You may deposit as much of
such payments as you elect. To enroll in Dreyfus Government Direct Deposit,
you must file with the Transfer Agent a completed Direct Deposit Sign-Up Form
for each type of payment that you desire to include in this Privilege. The
appropriate form may be obtained by calling 1-800-645-6561. Death or legal
incapacity will terminate your participation in this Privilege. You may elect
at any time to terminate your participation by notifying in writing the
appropriate Federal agency. Further, the Fund may terminate your
participation upon 30 days' notice to you.
DREYFUS PAYROLL SAVINGS PLAN _ Dreyfus Payroll Savings Plan permits you to
purchase shares (minimum of $100 per transaction) automatically on a regular
basis. Depending upon your employer's direct
[Page 11]
deposit program, you may have part or all of your paycheck transferred to
your existing Dreyfus account electronically through the Automated Clearing
House system at each pay period. To establish a Dreyfus Payroll Savings Plan
account, you must file an authorization form with your employer's payroll
department. Your employer must complete the reverse side of the form and
return it to The Dreyfus Family of Funds, P.O. Box 9671, Providence, Rhode
Island 02940-9671. You may obtain the necessary authorization form by calling
1-800-645-6561. You may change the amount of purchase or cancel the
authorization only by written notification to your employer. It is the sole
responsibility of your employer, not the Distributor, The Dreyfus
Corporation, the Fund, the Transfer Agent or any other person, to arrange for
transactions under the Dreyfus Payroll Savings Plan. The Fund may modify or
terminate this Privilege at any time or charge a service fee. No such fee
currently is contemplated.
DREYFUS STEP PROGRAM _ Dreyfus Step Program enables you to purchase Fund
shares without regard to the Fund's minimum initial investment requirements
through Dreyfus-Automatic Asset BuilderRegistration Mark, Dreyfus Government
Direct Deposit Privilege or Dreyfus Payroll Savings Plan. To establish a
Dreyfus Step Program account, you must supply the necessary information on
the Account Application and file the required authorization form(s) with the
Transfer Agent. For more information concerning this Program, or to request
the necessary authorization form(s), please call toll free 1-800-782-6620.
You may terminate your participation in this Program at any time by
discontinuing your participation in Dreyfus-AUTOMATIC Asset Builder, Dreyfus
Government Direct Deposit Privilege or Dreyfus Payroll Savings Plan, as the
case may be, or as provided under the terms of such Privilege(s). The Fund
may modify or terminate this Program at any time. Investors who wish to
purchase Fund shares through the Dreyfus Step Program in conjunction with a
Dreyfus-sponsored retirement plan may do so only for IRAs, SEP-IRAs and IRA
"Rollover Accounts."
DREYFUS DIVIDEND OPTIONS _ Dreyfus Dividend Sweep enables you to invest
automatically dividends or dividends and capital gain distributions, if any,
paid by the Fund in shares of another fund in the Dreyfus Family of Funds of
which you are a shareholder. Shares of the other fund will be purchased at
the then-current net asset value; however, a sales load may be charged with
respect to investments in shares of a fund sold with a sales load. If you are
investing in a fund that charges a sales load, you may qualify for share price
s which do not include the sales load or which reflect a reduced sales load.
If you are investing in a fund that charges a contingent deferred sales
charge, the shares purchased will be subject on redemption to the contingent
deferred sales charge, if any, applicable to the shares purchased. See
"Shareholder Services" in the Statement of Additional Information. Dreyfus
Dividend ACH permits you to transfer electronically dividends or dividends
and capital gain distributions, if any, from the Fund to a designated bank
account. Only an account maintained at a domestic financial institution which
is an Automated Clearing House member may be so designated. Banks may charge
a fee for this service.
For more information concerning these privileges or to request a
Dividend Options Form, please call toll free 1-800-645-6561. You may cancel
these privileges by mailing written notification to The Dreyfus Family of
Funds, P.O. Box 6527, Providence, Rhode Island 02940-6527. To select a new
fund after cancellation, you must submit a new Dividend Options Form.
Enrollment in or cancellation of these privileges is effective three business
days following receipt. These privileges are available only for existing
accounts and may not be used to open new accounts. Minimum subsequent
investments do not apply for Dreyfus Dividend Sweep. The Fund may modify or
terminate these privileges at any time or charge a service fee. No such fee
currently is contemplated. Shares held under Keogh Plans, IRAs or other
retirement plans are not eligible for DreyfusDividend Sweep.
AUTOMATIC WITHDRAWAL PLAN _ The Automatic Withdrawal Plan permits you to
request withdrawal of a specified dollar amount (minimum of $50) on either a
monthly or quarterly basis if you have a $5,000 minimum account. An Automatic
Withdrawal Plan may be established by filing an Automatic Withdrawal Plan
application with the Transfer Agent or by oral request from any of the
authorized signatories on the account by calling 1-800-645-6561. The
Automatic Withdrawal Plan may be ended at
[Page 12]
any time by you, the Fund or the Transfer Agent. Shares for which
certificates have been issued may not be redeemed through the Automatic
Withdrawal Plan.
RETIREMENT PLANS _ The Fund offers a variety of prototype pension and
profit-sharing plans, including Keogh Plans, IRAs, SEP-IRAs and IRA "Rollover
Accounts," 401(k) Salary Reduction Plans and 403(b)(7) Plans. Plan support
services are also available. You can obtain details on the various plans by
calling the following numbers toll free: for Keogh Plans, please call
1-800-358-5566; for IRAs and IRA "Rollover Accounts," please call
1-800-645-6561; or for SEP-IRAs, 401(k) Salary Reduction Plans and 403(b)(7)
Plans, please call 1-800-322-7880.
HOW TO REDEEM SHARES
GENERAL
You may request redemption of your shares at any time. Redemption
requests should be transmitted to the Transfer Agent as described below. When
a request is received in proper form, the Fund will redeem the shares at the
next determined net asset value. See "Appendix_Additional Information About
Purchases, Exchanges and Redemptions."
The Fund imposes no charges when shares are redeemed. Securities
dealers, banks and other financial institutions may charge their clients a
fee for effecting redemptions of Fund shares. Any certificates representing
Fund shares being redeemed must be submitted with the redemption request. The
value of the shares redeemed may be more or less than their original cost,
depending upon the Fund's then-current net asset value.
The Fund ordinarily will make payment for all shares redeemed within
seven days after receipt by the Transfer Agent of a redemption request in
proper form, except as provided by the rules of the Securities and Exchange
Commission. HOWEVER, IF YOU HAVE PURCHASED FUND SHARES BY CHECK, BY DREYFUS
TELETRANSFER PRIVILEGE OR THROUGH DREYFUS-AUTOMATIC ASSET BUILDERRegistration
Mark AND SUBSEQUENTLY SUBMIT A WRITTEN REDEMPTION REQUEST TO THE TRANSFER
AGENT, THE REDEMPTION PROCEEDS WILL BE TRANSMITTED TO YOU PROMPTLY UPON BANK
CLEARANCE OF YOUR PURCHASE CHECK, DREYFUS TELETRANSFER PURCHASE OR DREYFUS-
AUTOMATIC ASSET BUILDER ORDER, WHICH MAY TAKE UP TO EIGHT BUSINESS DAYS OR
MORE. IN ADDITION, THE FUND WILL NOT HONOR REDEMPTION CHECKS UNDER THE CHECK
REDEMPTION PRIVILEGE, AND WILL REJECT REQUESTS TO REDEEM SHARES BY WIRE OR
TELEPHONE OR PURSUANT TO THE DREYFUS TELETRANSFER PRIVILEGE, FOR A PERIOD OF
EIGHT BUSINESS DAYS AFTER RECEIPT BY THE TRANSFER AGENT OF THE PURCHASE
CHECK, THE DREYFUS TELETRANSFER PURCHASE OR THE DREYFUS-AUTOMATIC ASSET
BUILDER ORDER AGAINST WHICH SUCH REDEMPTION IS REQUESTED. THESE PROCEDURES
WILL NOT APPLY IF YOUR SHARES WERE PURCHASED BY WIRE PAYMENT, OR IF YOU
OTHERWISE HAVE A SUFFICIENT COLLECTED BALANCE IN YOUR ACCOUNT TO COVER THE
REDEMPTION REQUEST. PRIOR TO THE TIME ANY REDEMPTION IS EFFECTIVE, DIVIDENDS
ON SUCH SHARES WILL ACCRUE AND BE PAYABLE, AND YOU WILL BE ENTITLED TO
EXERCISE ALL OTHER RIGHTS OF BENEFICIAL OWNERSHIP. Fund shares will not be
redeemed until the Transfer Agent has received your Account Application.
The Fund reserves the right to redeem your account at its option upon
not less than 45 days' written notice if the number of shares held in your
account is 50 shares or less and remains so during the notice period.
PROCEDURES
You may redeem shares by using the regular redemption procedure
through the Transfer Agent, or through the Telephone Redemption Privilege or
the Check Redemption Privilege, which are granted automatically unless you
specifically refuse them by checking the applicable "No" box on the Account
Application. The Telephone Redemption Privilege and the Check Redemption
Privilege may be established for an existing account by a separate signed
Shareholder Services Form or, with respect to the Telephone Redemption
Privilege, by oral request from any of the authorized signatories on the
account by calling 1-800-645-6561. You also may redeem shares through the
Wire Redemption Privilege or the
[Page 13]
Dreyfus TELETRANSFER Privilege, if you have checked the appropriate box and
supplied the necessary information on the Account Application or have filed a
Shareholder Services Form with the Transfer Agent. The Fund makes available
to certain large institutions the ability to issue redemption instructions
through compatible computer facilities. The Fund reserves the right to refuse
any request made by wire or telephone, including requests made shortly after
a change of address, and may limit the amount involved or the number of such
requests. The Fund may modify or terminate any redemption Privilege at any
time or charge a service fee upon notice to shareholders. No such fee is
contemplated. Shares held under Keogh Plans, IRAs or other retirement plans,
and shares for which certificates have been issued, are not eligible for the
Check Redemption, Wire Redemption, Telephone Redemption or Dreyfus
TELETRANSFER Privilege.
The Telephone Redemption Privilege or Telephone Exchange Privilege
authorizes the Transfer Agent to act on telephone instructions (including
over The Dreyfus TouchRegistration Mark automated telephone system) from any
person representing himself or herself to be you, and reasonably believed by
the Transfer Agent to be genuine. The Fund will require the Transfer Agent to
employ reasonable procedures, such as requiring a form of personal
identification, to confirm that instructions are genuine and, if it does not
follow such procedures, the Fund or the Transfer Agent may be liable for any
losses due to unauthorized or fraudulent instructions. Neither the Fund nor
the Transfer Agent will be liable for following telephone instructions
reasonably believed to be genuine.
During times of drastic economic or market conditions, you may
experience difficulty in contacting the Transfer Agent by telephone to
request a redemption or exchange of Fund shares. In such cases, you should
consider using the other redemption procedures described herein. Use of these
other redemption procedures may result in your redemption request being
processed at a later time than it would have been if telephone redemption had
been used. During the delay, the Fund's net asset value may fluctuate.
REGULAR REDEMPTION _ Under the regular redemption procedure, you may redeem
shares by written request mailed to The Dreyfus Family of Funds, P.O. Box
9671, Providence, Rhode Island 02940-9671, or, if for Dreyfus retirement plan
accounts, to The Dreyfus Trust Company, Custodian, P.O. Box 6427, Providence,
Rhode Island 02940-6427. Redemption requests may be delivered in person only
to a Dreyfus Financial Center. THESE REQUESTS WILL BE FORWARDED TO THE FUND
AND WILL BE PROCESSED ONLY UPON RECEIPT THEREBY. For the location of the
nearest Dreyfus Financial Center, please call one of the telephone numbers
listed under "General Information." Redemption requests must be signed by
each shareholder, including each owner of a joint account, and each signature
must be guaranteed. The Transfer Agent has adopted standards and procedures
pursuant to which signature-guarantees in proper form generally will be
accepted from domestic banks, brokers, dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies
and savings associations, as well as from participants in the New York Stock
Exchange Medallion Signature Program, the Securities Transfer Agents
Medallion Program ("STAMP") and the Stock Exchanges Medallion Program. If you
have any questions with respect to signature-guarantees, please call one of
the telephone numbers listed under "General Information."
Redemption proceeds of at least $1,000 will be wired to any member
bank of the Federal Reserve System in accordance with a written
signature-guaranteed request.
CHECK REDEMPTION PRIVILEGE _ You may write Redemption Checks drawn on your
Fund account. Redemption Checks may be made payable to the order of any
person in the amount of $500 or more. Potential fluctuations in the net
asset value of the Fund's shares should be considered in determining the
amount of the check. Redemption Checks should not be used to close your
account. Redemption Checks are free, but the Transfer Agent will impose a fee
for stopping payment of a Redemption Check upon your request or if the
Transfer Agent cannot honor a Redemption Check because of insufficient funds
or other valid reason. You should date your Redemption Checks with the
current date when you write them. Please
[Page 14]
do not postdate your Redemption Checks. If you do, the Transfer Agent will
honor, upon presentment, even if presented before the date of the check, all
postdated Redemption Checks which are dated within six months of presentment
for payment, if they are otherwise in good order. If you hold shares in a
Dreyfus-sponsored IRA account, you may be permitted to make withdrawals from
your IRA account using checks furnished to you by The Dreyfus Trust Company.
This Privilege will be terminated immediately, without notice, with respect
to any account which is, or becomes, subject to backup withholding on
redemptions (see "Dividends, Distributions and Taxes"). Any Redemption Check
written on an account which has become subject to backup withholding on
redemptions will not be honored by the Transfer Agent. The Check Redemption
Privilege is granted automatically unless you refuse it.
WIRE REDEMPTION PRIVILEGE _ You may request by wire, telephone or letter
that redemption proceeds (minimum $1,000) be wired to your account at a bank
which is a member of the Federal Reserve System, or a correspondent bank if
your bank is not a member. Holders of jointly registered Fund or bank
accounts may have redemption proceeds of not more than $250,000 wired within
any 30-day period. You may telephone redemption requests by calling
1-800-645-6561 or, if you are calling from overseas, call 516-794-5452. The
Statement of Additional Information sets forth instructions for transmitting
redemption requests by wire.
TELEPHONE REDEMPTION PRIVILEGE _ You may request by telephone that
redemption proceeds (maximum $150,000 per day) be paid by check and mailed to
your address. You may telephone redemption instructions by calling
1-800-645-6561 or, if you are calling from overseas, call 516-794-5452. The
Telephone Redemption Privilege is granted automatically unless you refuse it.
DREYFUS TELETRANSFER PRIVILEGE _ You may request by telephone that
redemption proceeds (minimum $500 per day) be transferred between your Fund
account and your bank account. Only such an account maintained in a domestic
financial institution which is an Automated Clearing House member may be
designated. Redemption proceeds will be on deposit in your account at an
Automated Clearing House member bank ordinarily two days after receipt of the
redemption request. Holders of jointly registered Fund or bank accounts may
redeem through the Dreyfus TELETRANSFER Privilege for transfer to their bank
account not more than $250,000 within any 30-day period.
If you have selected the Dreyfus TELETRANSFER Privilege, you may
request a Dreyfus TELETRANSFER redemption of shares by calling 1-800-645-6561
or, if you are calling from overseas, call 516-794-5452.
SHAREHOLDER SERVICES PLAN
The Fund has adopted a Shareholder Services Plan pursuant to which it
reimburses Dreyfus Service Corporation, a wholly-owned subsidiary of The
Dreyfus Corporation, an amount not to exceed an annual rate of .25 of 1% of
the value of the Fund's average daily net assets for certain allocated
expenses of providing personal services and/or maintaining shareholder
accounts. The services provided may include personal services relating to
shareholder accounts, such as answering shareholder inquiries regarding the
Fund and providing reports and other information, and services related to the
maintenance of shareholder accounts.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The Fund ordinarily pays monthly dividends from net investment income
and makes distributions from net realized securities gains, if any, once a
year, but it may make distributions on a more frequent basis to comply with
the distribution requirements of the Internal Revenue Code of 1986, as
amended (the "Code"), in all events in a manner consistent with the
provisions of the 1940 Act. The Fund will not make distributions from net
realized securities gains unless capital loss carryovers, if any, have been
utilized or have expired. You may choose whether to receive dividends or
distributions in cash or to reinvest in additional Fund shares at net asset
value. If you elect to receive dividends and distributions
[Page 15]
in cash, and your dividend or distribution check is returned to the Fund as
undeliverable or remains uncashed for six months, the Fund reserves the right
to reinvest such dividend or distribution and all future dividends and
distributions payable to you in additional Fund shares at net asset value. No
interest will accrue on amounts represented by uncashed distribution or
redemption checks. All expenses are accrued daily and deducted before
declaration of dividends to investors.
Dividends derived from net investment income, together with
distributions from net realized short-term securities gains and all or a
portion of any gain realized from the sale or other disposition of certain
market discount bonds, paid by the Fund will be taxable to U.S. shareholders
as ordinary income whether received in cash or reinvested in additional
shares. No dividend paid by the Fund will qualify for the dividends received
deduction allowable to certain U.S. corporations. Distributions from net reali
zed long-term securities gains of the Fund will be taxable to U.S.
shareholders as long-term capital gains for Federal income tax purposes,
regardless of how long shareholders have held their Fund shares and whether
such distributions are received in cash or reinvested in additional shares.
The Code provides that an individual generally will be taxed on his or her
net capital gain at a maximum rate of 28% with respect to capital gain from
securities held for more than one year but not more than 18 months and at a
maximum rate of 20% with respect to capital gain from securities held for
more than 18 months. The Code, however, does not address the application of
these rules to distributions by regulated investment companies; consequently,
shareholders should consult their tax advisers as to the treatment of
distributions of net capital gain from the Fund. Dividends and distributions
may be subject to state and local taxes.
Dividends derived from net investment income, together with
distributions from net realized short-term securities gains and all or a
portion of any gain realized from the sale of or other disposition of certain
market discount bonds, paid by the Fund to a foreign investor generally are
subject to U.S. nonresident withholding taxes at the rate of 30%, unless the
foreign investor claims the benefit of a lower rate specified in a tax
treaty. Distributions from net realized long-term securities gains paid by
the Fund to a foreign investor as well as the proceeds of any redemptions
from a foreign investor's account, regardless of the extent to which gain or
loss may be realized, generally will not be subject to U.S. nonresident
withholding tax. However, such distributions and redemption proceeds may be
subject to backup withholding, as described below, unless the foreign
investor certifies his non-U.S. residency status.
Notice as to the tax status of your dividends and distributions will
be mailed to you annually. You also will receive periodic summaries of your
account which will include information as to dividends and distributions from
securities gains, if any, paid during the year.
The exchange of shares of one fund for shares of another is treated
for Federal income tax purposes as a sale of the shares given in exchange by
the shareholder and, therefore, an exchanging shareholder may realize a
taxable gain or loss.
Federal regulations generally require the Fund to withhold ("backup
withholding") and remit to the U.S. Treasury 31% of dividends, distributions
from net realized securities gains and the proceeds of any redemption,
regardless of the extent to which gain or loss may be realized, paid to a
shareholder if such shareholder fails to certify either that the TIN
furnished in connection with opening an account is correct, or that such
shareholder has not received notice from the IRS of being subject to backup
withholding as a result of a failure to properly report taxable dividend or
interest income on a Federal income tax return. Furthermore, the IRS may
notify the Fund to institute backup withholding if the IRS determines a
shareholder's TIN is incorrect or if a shareholder has failed to properly
report taxable dividend and interest income on a Federal income tax return.
A TIN is either the Social Security number, IRS individual taxpayer
identification number, or employer identification number of the record owner
of the account. Any tax withheld as a result of backup withholding does not
constitute an additional tax imposed on the record owner of the account, and
may be claimed as a credit on the record owner's Federal income tax return.
[Page 16]
Management of the Fund believes that the Fund has qualified for the
fiscal year ended March 31, 1997 as a "regulated
investment company" under the Code. The Fund intends to continue to so
qualify, if such qualification is in the best interests of its shareholders.
Such qualification relieves the Fund of any liability for Federal income tax
to the extent its earnings are distributed in accordance with applicable
provisions of the Code. The Fund is subject to a non-deductible 4% excise
tax, measured with respect to certain undistributed amounts of taxable
investment income and capital gains, if any.
You should consult your tax adviser regarding specific questions as
to Federal, state or local taxes.
PERFORMANCE INFORMATION
For purposes of advertising, performance may be calculated on several
bases, including current yield, average annual total return and/or total
return.
Current yield refers to the Fund's annualized net investment income
per share over a 30-day period, expressed as a percentage of the net asset
value per share at the end of the period. For purposes of calculating current
yield, the amount of net investment income per share during that 30-day
period, computed in accordance with regulatory requirements, is compounded by
assuming that it is reinvested at a constant rate over a six-month period. An
identical result is then assumed to have occurred during a second six-month
period which, when added to the result for the first six months, provides an
"annualized" yield for an entire one-year period.
Average annual total return is calculated pursuant to a standardized
formula which assumes that an investment in the Fund was purchased with an
initial payment of $1,000 and that the investment was redeemed at the end of
a stated period of time, after giving effect to the reinvestment of dividends
and distributions during the period. The return is expressed as a percentage
rate which, if applied on a compounded annual basis, would result in the
redeemable value of the investment at the end of the period. Advertisements
of the Fund's performance will include the Fund's average annual total return
for one, five and ten year periods.
Total return is computed on a per share basis and assumes the
reinvestment of dividends and distributions. Total return generally is
expressed as a percentage rate which is calculated by combining the income
and principal changes for a specified period and dividing by the net asset
value per share at the beginning of the period. Advertisements may include
the percentage rate of total return or may include the value of a
hypothetical investment at the end of the period which assumes the
application of the percentage rate of total return.
Performance will vary from time to time and past results are not
necessarily representative of future results. You should remember that
performance is a function of portfolio management in selecting the type and
quality of portfolio securities and is affected by operating expenses.
Performance information, such as that described above, may not provide a
basis for comparison with other investments or other investment companies
using a different method of calculating performance.
Comparative performance information may be used from time to time in
advertising or marketing the Fund's shares, including data from Consumer
Price Index, Lipper Analytical Services, Inc., Moody's Bond Survey Bond
Index, Lehman Brothers Corporate Bond Index, Salomon Brothers High Grade
Index, Morningstar, Inc., IBC Bond Fund Report and other industry
publications.
GENERAL INFORMATION
The Fund was incorporated under Maryland law on February 23, 1976.
The Fund is authorized to issue 100 million shares of Common Stock, par value
$.01 per share. Each share has one vote.
Unless otherwise required by the 1940 Act, ordinarily it will not be
necessary for the Fund to hold annual meetings of shareholders. As a result,
Fund shareholders may not consider each year the election of Board members or
the appointment of auditors. However, pursuant to the Fund's By-Laws, the
holders
[Page 17]
of at least 10% of the shares outstanding and entitled to vote may
require the Fund to hold a special meeting of shareholders for purposes of
removing a Board member from office and the holders of at least 25% of such
shares may require the Fund to hold a special meeting of shareholders for any
other purpose. Fund shareholders may remove a Board member by the affirmative
vote of a majority of the Fund's outstanding voting shares. In addition, the
Fund's Board will call a meeting of shareholders for the purpose of electing
Board members if, at any time, less than a majority of the Board members then
holding office have been elected by shareholders.
The Transfer Agent maintains a record of your ownership and sends you
confirmations and statements of account.
Shareholder inquiries may be made by writing to the Fund at 144 Glenn
Curtiss Boulevard, Uniondale, New York 11556-0144, or by calling toll free
1-800-645-6561. In New York City, call
1-718-895-1206; outside the U.S., call 516-794-5452.
[Page 18]
APPENDIX
INVESTMENT TECHNIQUES
BORROWING MONEY _ The Fund is permitted to borrow to the extent permitted
under the 1940 Act, which permits an investment company to borrow in an
amount up to 331\3% of the value of its total assets. The Fund currently
intends to borrow money only for temporary or emergency (not leveraging)
purposes, in an amount up to 15% of the value of its total assets (including
the amount borrowed) valued at the lesser of cost or market, less liabilities
(not including the amount borrowed) at the time the borrowing is made. While
borrowings exceed 5% of the Fund's total assets, the Fund will not make any
additional investments.
LENDING PORTFOLIO SECURITIES _ The Fund may lend securities from its
portfolio to brokers, dealers and other financial institutions needing to
borrow securities to complete certain transactions. The Fund continues to be
entitled to payments in amounts equal to the interest or other distributions
payable on the loaned securities which affords the Fund an opportunity to
earn interest on the amount of the loan and on the loaned securities'
collateral. Loans of portfolio securities may not exceed 10% of the value of
the Fund's total assets, and the Fund will receive collateral consisting of
cash, U.S. Government securities or irrevocable letters of credit which will
be maintained at all times in an amount equal to at least 100% of the current
market value of the loaned securities. Such loans are terminable by the Fund
at any time upon specified notice. The Fund might experience risk of loss if
the institution with which it has engaged in a portfolio loan transaction
breaches its agreement with the Fund.
FORWARD COMMITMENTS _ The Fund may purchase or sell securities on a forward
commitment, when-issued or delayed delivery basis, which means delivery and
payment take place a number of days after the date of the commitment to
purchase or sell the securities at a predetermined price and/or yield.
Typically, no interest accrues to the purchaser until the security is
delivered. When purchasing a security on a forward commitment basis, the Fund
assumes the rights and risks of ownership of the security, including the risk
of price and yield fluctuations, and takes such fluctuations into account
when determining its net asset value. Because the Fund is not required to pay
for these securities until the delivery date, these risks are in addition to
the risks associated with the Fund's other investments. If the Fund is fully
or almost fully invested when forward commitment purchases are outstanding,
such purchases may result in a form of leverage. The Fund may engage in
forward commitments to increase its portfolio's financial exposure to the
types of securities in which it invests. Leveraging the portfolio in this
manner will increase the Fund's exposure to changes in interest rates and
will increase the volatility of its returns. A segregated account of the Fund
consisting of permissible liquid assets at least equal at all times to the
amount of the commitments will be established and maintained at the Fund's
custodian bank. At no time will the Fund have more than 331\3% of its assets
committed to purchase securities on a forward commitment basis.
USE OF DERIVATIVES _ The Fund may invest in, or enter into, the types of
Derivatives enumerated under "Description of the Fund _ Investment
Considerations and Risks _ Use of Derivatives." These instruments and
certain related risks are described more specifically under "Investment
Objective and Management Policies _ Management Policies _ Derivatives" in
the Statement of Additional Information.
Derivatives can be volatile and involve various types and degrees of
risk, depending upon the characteristics of the particular Derivative and the
portfolio as a whole. Derivatives permit the Fund to increase or decrease the
level of risk, or change the character of the risk, to which its portfolio is
exposed in much the same way as the Fund can increase or decrease the level
of risk, or change the character of the risk, of its portfolio by making
investments in specific securities.
Derivatives may entail investment exposures that are greater than
their cost would suggest, meaning that a small investment in Derivatives
could have a large potential impact on the Fund's performance.
#
[Page 19]
If the Fund invests in Derivatives at inappropriate times or judges
market conditions incorrectly, such investments may
lower the Fund's return or result in a loss. The Fund also could experience
losses if its Derivatives were poorly correlated with its other investments,
or if it were unable to liquidate its position because of an illiquid
secondary market. The market for many Derivatives is, or suddenly can become,
illiquid. Changes in liquidity may result in significant, rapid and
unpredictable changes in the prices for Derivatives.
CERTAIN PORTFOLIO SECURITIES
U.S. TREASURY SECURITIES _ U.S Treasury securities include Treasury
Inflation-Protection Securities ("TIPS"), which are newly created securities
issued by the U.S. Treasury designed to provide investors a long term
investment vehicle that is not vulnerable to inflation. The interest rate
paid by TIPS is fixed, while the principal value rises or falls semi-annually
based on changes in a published Consumer Price Index. Thus, if inflation
occurs, the principal and interest payments on the TIPS are adjusted
accordingly to protect investors from inflationary loss. During a
deflationary period, the principal and interest payments decrease, although
the TIPS' principal will not drop below its face amount at maturity.
In exchange for the inflation protection, TIPS generally pay lower
interest rates than typical Treasury securities. Only if inflation occurs
will TIPS offer a higher real yield than a conventional Treasury bond of the
same maturity. In addition, it is not possible to predict with assurance how
the market for TIPS will develop; initially, the secondary market for these
securities may not be as active or liquid as the secondary market for
conventional Treasury securities. Principal appreciation and interest
payments on TIPS will be taxed annually as ordinary interest income for
Federal income tax calculations. As a result, any appreciation in principal
must be counted as interest income in the year the increase occurs, even
though the investor will not receive such amounts until the TIPS are sold or
mature. Principal appreciation and interest payments will be exempt from
state and local income taxes.
MUNICIPAL OBLIGATIONS _ Municipal obligations are debt obligations issued by
states, territories and possessions of the United States and the District of
Columbia and their political subdivisions, agencies and instrumentalities, or
multistate agencies or authorities. Municipal obligations bear fixed,
floating or variable rates of interest. Certain municipal obligations are
subject to redemption at a date earlier than their stated maturity pursuant
to call options, which may be separated from the related municipal
obligations and purchased and sold separately. The Fund also may acquire call
options on specific municipal obligations. The Fund generally would purchase
these call options to protect the Fund from the issuer of the related
municipal obligation redeeming, or other holder of the call option from
calling away, the municipal obligation before maturity.
While, in general, municipal obligations are tax exempt securities
having relatively low yields as compared to taxable, non-municipal
obligations of similar quality, certain municipal obligations are taxable
obligations, offering yields comparable to, and in some cases greater than,
the yields available on other permissible Fund investments. Dividends
received by shareholders on Fund shares which are attributable to interest
income received by the Fund from municipal obligations generally will be
subject to Federal income tax. The Fund will invest in municipal obligations,
the ratings of which correspond with the ratings of other permissible Fund
investments. The Fund currently intends to invest no more than 25% of its
total assets in municipal obligations. However, this percentage may be varied
from time to time without shareholder approval.
MORTGAGE-RELATED SECURITIES_Mortgage-related securities are a form of
Derivative collateralized by pools of commercial or residential mortgages.
Pools of mortgage loans are assembled as securities for sale to investors by
various governmental, government-related and private organizations. These
securities may include complex instruments such as collateralized mortgage
obligations, stripped mortgage-backed securities, mortgage pass-through
securities, interests in real estate mortgage investment conduits ("REMICs"),
[Page 20]
adjustable rate mortgages, real estate investment trusts ("REITs"), including
debt and preferred stock issued by REITs, as well as other real
estate-related securities.
In certain instances, the credit risk associated with
mortgage-related securities can be reduced by third party guarantees or other
forms of credit support. Improved credit risk does not reduce prepayment risk
which is unrelated to the rating assigned to the mortgage-related security.
Prepayment risk can lead to fluctuations in value of the mortgage-related
security which may be pronounced. If a mortgage-related security is purchased
at a premium, all or part of the premium may be lost if there is a decline in
the market value of the security, whether resulting from changes in interest
rates or prepayments on the underlying mortgage collateral. Certain
mortgage-related securities that may be purchased by the Fund, such as
inverse floating rate collateralized mortgage obligations, have coupons that
move inversely to a multiple of a specific index which may result in a form
of leverage. As with other interest-bearing securities, the prices of certain
mortgage-related securities are inversely affected by changes in interest
rates. However, although the value of a mortgage-related security may decline
when interest rates rise, the converse is not necessarily true, since in
periods of declining interest rates the mortgages underlying the security are
more likely to be prepaid. For this and other reasons, a mortgage-related
security's stated maturity may be shortened by unscheduled prepayments on the
underlying mortgages, and, therefore, it is not possible to predict
accurately the security's return to the Fund. Moreover, with respect to
certain stripped mortgage-backed securities, if the underlying mortgage
securities experience greater than anticipated prepayments of principal, the
Fund may fail to fully recoup its initial investment even if the securities
are rated in the highest rating category by a nationally recognized
statistical rating organization. During periods of rapidly rising interest
rates, prepayments of mortgage-related securities may occur at slower than
expected rates. Slower prepayments effectively may lengthen a
mortgage-related security's expected maturity which generally would cause the
value of such security to fluctuate more widely in response to changes in
interest rates. Were the prepayments on the Fund's mortgage-related securities
to decrease broadly, the Fund's effective duration, and thus sensitivity to
interest rate fluctuations, would increase.
RESIDENTIAL MORTGAGE-RELATED SECURITIES. The Fund may invest in
mortgage-related securities representing participation interests in pools of
one- to four-family residential mortgage loans issued or guaranteed by
governmental agencies or instrumentalities, such as the Government National
Mortgage Association ("GNMA"), the Federal National Mortgage Association
("FNMA"), and the Federal Home Loan Mortgage Corporation ("FHLMC"), or issued
by private entities. Similar to commercial mortgage-related securities,
residential mortgage-related securities have been issued using a variety of
structures, including multi-class structures featuring senior and
subordinated classes.
COMMERCIAL MORTGAGE-RELATED SECURITIES. The Fund may invest in
commercial mortgage-related securities, which generally are multi-class debt
or pass-through certificates secured by mortgage loans on commercial
properties. These mortgage-related securities generally are structured to
provide protection to the senior classes' investors against potential losses
on the underlying mortgage loans. This protection is generally provided by
having the holders of subordinated classes of securities ("Subordinated
Securities") take the first loss if there are defaults on the underlying
commercial mortgage loans. Other protection, which may benefit all of the
classes or particular classes, may include issuer guarantees, reserve funds,
additional Subordinated Securities, cross-collateralization and over-
collateralization.
SUBORDINATED SECURITIES. The Fund may invest in Subordinated
Securities issued or sponsored by commercial banks, savings and loan
institutions, mortgage bankers, private mortgage insurance companies and
other non-governmental issuers. Subordinated Securities have no governmental
guarantee, and are subordinated in some manner as to the payment of principal
and/or interest to the holders of more senior mortgage-related securities
arising out of the same pool of mortgages. The holders of Subordinated
Securities typically are compensated with a higher stated yield than are the
holders of more senior mortgage-related securities. On the other hand,
Subordinated Securities typically subject the holder to greater
[Page 21]
risk than senior mortgage-related securities and tend to be rated in a lower
rating category, and frequently a substantially lower rating category, than
the senior mortgage-related securities issued in respect of the same pool of
mortgages. Subordinated Securities generally are likely to be more sensitive
to changes in prepayment and interest rates and the market for such
securities may be less liquid than is the case for traditional fixed-income
securities and senior mortgage-related securities.
COLLATERALIZED MORTGAGE OBLIGATIONS AND MULTI-CLASS PASS-THROUGH
SECURITIES. Collateralized mortgage obligations or "CMOs" are multiclass
bonds backed by pools of mortgage pass-through certificates or mortgage
loans. CMOs may be collateralized by (a) pass-through certificates issued or
guaranteed by GNMA, FNMA or FHLMC, (b) unsecuritized mortgage loans insured
by the Federal Housing Administration or guaranteed by the Department of
Veterans' Affairs, (c) unsecuritized conventional mortgages, (d) other
mortgage-related securities or (e) any combination thereof.
Each class of CMOs, often referred to as a "tranche," is issued at a
specific coupon rate and has a stated maturity or final distribution date.
Principal prepayments on collateral underlying a CMO may cause it to be
retired substantially earlier than the stated maturities or final
distribution dates. The principal and interest on the underlying mortgages
may be allocated among the several classes of a series of a CMO in many ways.
One or more tranches of a CMO may have coupon rates which reset periodically
at a specified increment over an index, such as the London Interbank Offered
Rate ("LIBOR") (or sometimes more than one index). These floating rate CMOs
typically are issued with lifetime caps on the coupon rate thereon. The Fund
also may invest in inverse floating rate CMOs. Inverse floating rate CMOs
constitute a tranche of a CMO with a coupon rate that moves in the reverse
direction to an applicable index such as the LIBOR. Accordingly, the coupon
rate thereon will increase as interest rates decrease. Inverse floating rate
CMOs are typically more volatile than fixed or floating rate tranches of
CMOs.
STRIPPED MORTGAGE-BACKED SECURITIES. The Fund also may invest in
stripped mortgage-backed securities which are created by segregating the cash
flows from underlying mortgage loans or mortgage securities to create two or
more new securities, each with a specified percentage of the underlying
security's principal or interest payments. Mortgage securities may be
partially stripped so that each investor class receives some interest and
some principal. When securities are completely stripped, however, all of the
interest is distributed to holders of one type of security, known as an
interest-only security, or IO, and all of the principal is distributed to
holders of another type of security known as a principal-only security, or
PO. Strips can be created in a pass-through structure or as tranches of a
CMO. The yields to maturity on IOs and POs are very sensitive to the rate of
principal payments (including prepayments) on the related underlying mortgage
assets. If the underlying mortgage assets experience greater than anticipated
prepayments of principal, the Fund may not fully recoup its initial
investment in IOs. Conversely, if the underlying mortgage assets experience
less than anticipated prepayments of principal, the yield on POs could be
materially and adversely affected.
REAL ESTATE INVESTMENT TRUSTS. A REIT is a corporation, or a business
trust that would otherwise be taxed as a corporation, which meets the
definitional requirements of the Code. The Code permits a qualifying REIT to
deduct dividends paid, thereby effectively eliminating corporate level
Federal income tax and making the REIT a pass-through vehicle for Federal
income tax purposes. To meet the definitional requirements of the Code, a
REIT must, among other things, invest substantially all of its assets in
interests in real estate (including mortgages and other REITs) or cash and
government securities, derive most of its income from rents from real
property or interest on loans secured by mortgages on real property, and
distribute to shareholders annually a substantial portion of its otherwise
taxable income. REITs are subject to heavy cash flow dependency, defaults by
borrowers or tenants, self-liquidation and the possibility of failing to
qualify for tax-free status under the Code or to maintain exemption from the
1940 Act.
[Page 22]
PRIVATE ENTITY SECURITIES. These mortgage-related securities are
issued by commercial banks, savings and loan
institutions, mortgage bankers, private mortgage insurance companies and
other non-governmental issuers. Timely payment of principal and interest on
mortgage-related securities backed by pools created by non-governmental
issuers often is supported partially by various forms of insurance or
guarantees, including individual loan, title, pool and hazard insurance.
ASSET-BACKED SECURITIES _ Asset-backed securities are a form of Derivative.
The securitization techniques used for asset-backed securities are similar to
those used for mortgage-related securities. These securities include debt
securities and securities with debt-like characteristics. The collateral for
these securities has included home equity loans, automobile and credit card
receivables, boat loans, computer leases, airplane leases, mobile home loans,
recreational vehicle loans and hospital account receivables. The Fund may
invest in these and other types of asset-backed securities that may be
developed in the future.
Asset-backed securities present certain risks that are not presented
by mortgage-backed securities. Primarily, these securities may provide the
Fund with a less effective security interest in the related collateral than
do mortgage-backed securities. Therefore, there is the possibility that
recoveries on the underlying collateral may not, in some cases, be available
to support payments on these securities.
MONEY MARKET INSTRUMENTS _ The Fund may invest in the following types of
money market instruments.
U.S. GOVERNMENT SECURITIES. Securities issued or guaranteed by the
U.S. Government or its agencies or instrumentalities include U.S. Treasury
securities that differ in their interest rates, maturities and times of
issuance. Some obligations issued or guaranteed by U.S. Government agencies
and instrumentalities are supported by the full faith and credit of the U.S.
Treasury; others by the right of the issuer to borrow from the U.S. Treasury;
others by discretionary authority of the U.S. Government to purchase certain
obligations of the agency or instrumentality; and others only by the credit
of the agency or instrumentality. These securities bear fixed, floating or
variable rates of interest. While the U.S. Government provides financial
support to such U.S. Government-sponsored agencies and instrumentalities, no
assurance can be given that it will always do so since it is not so obligated
by law.
REPURCHASE AGREEMENTS. In a repurchase agreement, the Fund buys, and
the seller agrees to repurchase, a security at a mutually agreed upon time
and price (usually within seven days). The repurchase agreement thereby
determines the yield during the purchaser's holding period, while the
seller's obligation to repurchase is secured by the value of the underlying
security. Repurchase agreements could involve risks in the event of a default
or insolvency of the other party to the agreement, including possible delays
or restrictions upon the Fund's ability to dispose of the underlying
securities. The Fund may enter into repurchase agreements with certain banks
or non-bank dealers.
BANK OBLIGATIONS. The Fund may purchase certificates of deposit, time
deposits, bankers' acceptances and other short-term obligations issued by
domestic banks, foreign subsidiaries or foreign branches of domestic banks,
domestic and foreign branches of foreign banks, domestic savings and loan
associations and other banking institutions. With respect to such securities
issued by foreign subsidiaries or foreign branches of domestic banks, and
domestic and foreign branches of foreign banks, the Fund may be subject to
additional investment risks that are different in some respects from those
incurred by a fund which invests only in debt obligations of U.S. domestic
issuers. See "Description of the Fund _ Investment Considerations and Risks
_ Foreign Securities."
Certificates of deposit are negotiable certificates evidencing the
obligation of a bank to repay funds deposited with it for a specified period
of time.
Time deposits are non-negotiable deposits maintained in a banking
institution for a specified period of time (in no event longer than seven
days) at a stated interest rate.
[Page 23]
Bankers' acceptances are credit instruments evidencing the obligation
of a bank to pay a draft drawn on it by a customer.
These instruments reflect the obligation both of the bank and the drawer to
pay the face amount of the instrument upon maturity. The other short-term
obligations may include uninsured, direct obligations bearing fixed, floating
or variable interest rates.
COMMERCIAL PAPER. Commercial paper consists of short-term, unsecured
promissory notes issued to finance short-term credit needs. The commercial
paper purchased by the Fund will consist only of direct obligations which, at
the time of their purchase, are (a) rated not lower than Prime-1 by Moody's,
or A-1 by S&P, (b) issued by companies having an outstanding unsecured debt
issue currently rated at least A by Moody's or S&P, or if (c) unrated,
determined by The Dreyfus Corporation to be of comparable quality to those
rated obligations which may be purchased by the Fund.
ZERO COUPON SECURITIES _ The Fund may invest in zero coupon U.S. Treasury
securities, which are Treasury Notes and Bonds that have been stripped of
their unmatured interest coupons, the coupons themselves and receipts or
certificates representing interests in such stripped debt obligations and
coupons. Zero coupon securities also are issued by corporations and financial
institutions which constitute a proportionate ownership of the issuer's pool
of underlying U.S. Treasury securities. A zero coupon security pays no
interest to its holder during its life and is sold at a discount to its face
value at maturity. The market prices of zero coupon securities generally are
more volatile than the market prices of securities that pay interest
periodically and are likely to respond to a greater degree to changes in
interest rates than non-zero coupon securities having similar maturities and
credit qualities.
ILLIQUID SECURITIES _ The Fund may invest up to 15% of the value of its net
assets in securities as to which a liquid trading market does not exist,
provided such investments are consistent with the Fund's investment
objective. Such securities may include securities that are not readily
marketable, such as certain securities that are subject to legal or
contractual restrictions on resale, repurchase agreements providing for
settlement in more than seven days after notice, and certain mortgage-related
securities. As to these securities, the Fund is subject to a risk that should
the Fund desire to sell them when a ready buyer is not available at a price
the Fund deems representative of their value, the value of the Fund's net
assets could be adversely affected.
RATINGS _ Obligations rated Baa by Moody's are considered medium grade
obligations; they are neither highly protected nor poorly secured, and are
considered by Moody's to have speculative characteristics. Bonds rated BBB by
S&P are investment grade and regarded as having adequate capacity to pay
interest and repay principal; however, adverse changes in economic conditions
and circumstances are more likely to have an adverse impact on these bonds
and, therefore, impair timely payment. The Fund may invest up to 5% of its
assets in higher yielding (and, therefore, higher risk) debt securities such
as those rated Ba by Moody's or BB by S&P, or as low as those rated B by
Moody's or S&P (commonly known as junk bonds). They may be subject to certain
risks with respect to the issuing entity and to greater market fluctuations
than certain lower yielding, higher rated fixed-income securities. The retail
secondary market for these securities may be less liquid than that of higher
rated securities; adverse conditions could make it difficult at times for the
Fund to sell certain securities or could result in lower prices than those
used in calculating the Fund's net asset value. See "Appendix" in the
Statement of Additional Information for a general description of securities
ratings.
The ratings of Moody's and S&P represent their opinions as to the
quality of the obligations which they undertake to rate. Ratings are relative
and subjective and, although ratings may be useful in evaluating the safety
of interest and principal payments, they do not evaluate the market value
risk of such
[Page 24]
obligations. Although these ratings may be an initial criterion for selection
of portfolio investments, The Dreyfus Corporation also will evaluate these
securities and the ability of the issuers of such securities to pay interest
and principal. The Fund's ability to achieve its investment objective may be
more dependent on The Dreyfus Corporation's credit analysis than might be the
case for a fund that invested in higher rated securities.
Additional Information About Purchases, Exchanges and Redemptions. The Fund
is intended to be a long-term investment vehicle and is not designed to
provide investors with a means of speculation on short-term market movements.
A pattern of frequent purchases and exchanges can be disruptive to efficient
portfolio management and, consequently, can be detrimental to the Fund's
performance and its shareholders. Accordingly, if the Fund's management
determines that an investor is engaged in excessive trading, the Fund, with
or without prior notice, may temporarily or permanently terminate the
availability of Fund Exchanges, or reject in whole or part any purchase or
exchange request, with respect to such investor's account. Such investors
also may be barred from purchasing other funds in the Dreyfus Family of
Funds. Generally, an investor who makes more than four exchanges out of the
Fund during any calendar year (for calendar year 1998, beginning on January
15th) or who makes exchanges that appear to coincide with an active
market-timing strategy may be deemed to be engaged in excessive trading.
Accounts under common ownership or control will be considered as one account
for purposes of determining a pattern of excessive trading. In addition, the
Fund may refuse or restrict purchase or exchange requests by any person or
group if, in the judgment of the Fund's management, the Fund would be unable
to invest the money effectively in accordance with its investment objective
and policies or could otherwise be adversely affected or if the Fund receives
or anticipates receiving simultaneous orders that may significantly affect
the Fund (E.G., amounts equal to 1% or more of the Fund's total assets). If
an exchange request is refused, the Fund will take no other action with
respect to the shares until it receives further instructions from the
investor. The Fund may delay forwarding redemption proceeds for up to seven
days if the investor redeeming shares is engaged in excessive trading or if
the amount of the redemption request otherwise would be disruptive to
efficient portfolio management or would adversely affect the Fund. The Fund's
policy on excessive trading applies to investors who invest in the Fund
directly or through financial intermediaries, but does not apply to the
Dreyfus Auto-Exchange Privilege, to any automatic investment or withdrawal
privilege described herein, or to employer-sponsored retirement plans.
During times of drastic economic or market conditions, the Fund may
suspend Fund Exchanges temporarily without notice and treat exchange requests
based on their separate components _ redemption orders with a simultaneous
request to purchase the other fund's shares. In such a case, the redemption
request would be processed at the Fund's next determined net asset value but
the purchase order would be effective only at the net asset value next
determined after the fund being purchased receives the proceeds of the
redemption, which may result in the purchase being delayed.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND IN THE
FUND'S OFFICIAL SALES LITERATURE IN CONNECTION WITH THE OFFER OF THE FUND'S
SHARES, AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUND. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER IN ANY STATE IN WHICH, OR TO ANY PERSON TO WHOM,
SUCH OFFERING MAY NOT LAWFULLY BE MADE.
[Page 25]
[This Page Intentionally Left Blank]
[Page 26]
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[Page 27]
A Bonds
Plus, Inc.
Prospectus
Registration Mark
Copy Rights1997, Dreyfus Service Corporation 084p1197
[Page 28]
DREYFUS A BONDS PLUS, INC.
PART B
(STATEMENT OF ADDITIONAL INFORMATION)
AUGUST 1, 1997, AS REVISED NOVEMBER 15, 1997
This Statement of Additional Information, which is not a prospectus,
supplements and should be read in conjunction with the current Prospectus of
Dreyfus A Bonds Plus, Inc. (the "Fund"), dated August 1, 1997, as may be
revised from time to time. To obtain a copy of the Fund's Prospectus,
please write to the Fund at 144 Glenn Curtiss Boulevard, Uniondale, New York
11556-0144, or call the following numbers:
Call Toll Free 1-800-645-6561
In New York City -- Call 1-718-895-1206
Outside the U.S. -- Call 516-794-5452
The Dreyfus Corporation (the "Manager") serves as the Fund's investment
adviser.
Premier Mutual Fund Services, Inc. (the "Distributor") is the
distributor of the Fund's shares.
TABLE OF CONTENTS
Page
Investment Objective and Management Policies B-2
Management of the Fund B-11
Management Agreement B-15
Purchase of Shares B-17
Shareholder Services Plan B-18
Redemption of Shares B-19
Shareholder Services B-21
Portfolio Transactions B-24
Determination of Net Asset Value B-25
Dividends, Distributions and Taxes B-26
Performance Information B-26
Information About the Fund B-27
Transfer and Dividend Disbursing Agent, Custodian,
Counsel and Independent Auditors B-27
Appendix B-29
Financial Statements B-32
Report of Independent Auditors B-42
INVESTMENT OBJECTIVE AND MANAGEMENT POLICIES
The following information supplements and should be read in conjunction
with the sections in the Fund's Prospectus entitled "Description of the
Fund" and "Appendix."
Portfolio Securities
Repurchase Agreements. The Fund's custodian or sub-custodian will have
custody of, and will hold in a segregated account, securities acquired by
the Fund under a repurchase agreement. Repurchase agreements are considered
by the staff of the Securities and Exchange Commission to be loans by the
Fund. In an attempt to reduce the risk of incurring a loss on a repurchase
agreement, the Fund will enter into repurchase agreements only with domestic
banks with total assets in excess of $1 billion, or primary government
securities dealers reporting to the Federal Reserve Bank of New York, with
respect to securities of the type in which the Fund may invest, and will
require that additional securities be deposited with it if the value of the
securities purchased should decrease below the resale price.
Commercial Paper and Other Short-Term Corporate Obligations. These
instruments include variable amount master demand notes, which are
obligations that permit the Fund to invest fluctuating amounts at varying
rates of interest pursuant to direct arrangements between the Fund, as
lender, and the borrower. These notes permit daily changes in the amounts
borrowed. Because these obligations are direct lending arrangements between
the lender and borrower, it is not contemplated that such instruments
generally will be traded, and there generally is no established secondary
market for these obligations, although they are redeemable at face value,
plus accrued interest, at any time. Accordingly, where these obligations
are not secured by letters of credit or other credit support arrangements,
the Fund's right to redeem is dependent on the ability of the borrower to
pay principal and interest on demand. Such obligations frequently are not
rated by credit rating agencies, and the Fund may invest in them only if at
the time of an investment the borrower meets the criteria set forth in the
Fund's Prospectus for other commercial paper issuers.
Municipal Obligations. Municipal obligations generally include debt
obligations issued to obtain funds for various public purposes as well as
certain industrial development bonds issued by or on behalf of public
authorities. Municipal obligations are classified as general obligation
bonds, revenue bonds and notes. General obligation bonds are secured by the
issuer's pledge of its faith, credit and taxing power for the payment of
principal and interest. Revenue bonds are payable from the revenue derived
from a particular facility or class of facilities or, in some cases, from
the proceeds of a special excise or other specific revenue source, but not
from the general taxing power. Industrial development bonds, in most cases,
are revenue bonds and generally do not carry the pledge of the credit of the
issuing municipality, but generally are guaranteed by the corporate entity
on whose behalf they are issued. Notes are short-term instruments which are
obligations of the issuing municipalities or agencies and are sold in
anticipation of a bond sale, collection of taxes or receipt of other
revenues. Municipal obligations include municipal lease/purchase agreements
which are similar to installment purchase contracts for property or
equipment issued by municipalities.
Mortgage-Related Securities. Mortgage-related securities are a form of
Derivative collaterialized by pools of commercial or residential mortgages.
Pools of mortgage loans are assembled as securities for sale to investors by
various governmental, government-related and private organizations. These
securities may include complex instruments such as collaterialized mortgage
obligations and stripped mortgage-backed securities, mortgage pass-through
securities, interests in REMICs or other kinds of mortgage-backed
securities, including those with fixed, floating and variable interest
rates, those with interests rates that change based on multiples of changes
in a specified index of interest rates and those with interest rates that
change inversely to changes in interest rates.
Government-Agency Securities -- Mortgage-related securities issued by the
Government National Mortgage Association ("GNMA") include GNMA Mortgage
Pass-Through Certificates (also known as "Ginnie Maes") which are guaranteed
as to the timely payment of principal and interest by GNMA and such
guarantee is backed by the full faith and credit of the United States. GNMA
is a wholly-owned U.S. Government corporation within the department of
Housing and Urban Development. GNMA certificates also are supported by the
authority of GNMA to borrow funds from the U.S. Treasury to make payments
under its guarantee.
Government-Related Securities -- Mortgage-related securities issued by the
Federal National Mortgage Association ("FNMA") include FNMA Guaranteed
Mortgage Pass-Through Certificates (also known as "Fannie Maes") which are
solely the obligations of FNMA and are not backed by or entitled to the full
faith and credit of the United States. FNMA is a government-sponsored
organization owned entirely by private stockholders. Fannie Maes are
guaranteed as to timely payment of principal and interest by FNMA.
Mortgage-related securities issued by the Federal Home Loan Mortgage
Corporation ("FHLMC") include FHLMC Mortgage Participation Certificates
(also known as "Freddie Macs" or "PCs"). FHLMC is a corporate
instrumentality of the United States created pursuant to an Act of Congress,
which is owned entirely by Federal Home Loan Banks. Freddie Macs are not
guaranteed by the United States or by any Federal Home Loan Bank and do not
constitute a debt or obligation of the United States or of any Federal Home
Loan Bank. Freddie Macs entitle the holder to timely payment of interest,
which is guaranteed by FHLMC. FHLMC guarantees either ultimate collection
or timely payment of all principal payments on the underlying mortgage
loans. When FHLMC does not guarantee timely payment of principal, FHLMC may
remit the amount due on account of its guarantee of ultimate payment of
principal at any time after default on an underlying mortgage, but in no
event later than one year after it becomes payable.
Private Entity Securities -- These mortgage-related securities are issued by
commercial banks, savings and loan institutions, mortgage bankers, private
mortgage insurance companies and other non-governmental issuers. Timely
payment of principal and interest on mortgage-related securities backed by
pools created by non-governmental issuers often is supported partially by
various forms of insurance or guarantees, including individual loan, title,
pool and hazard insurance. The insurance and guarantees are issued by
government entities, private insurers and the mortgage poolers. There can
be no assurance that the private insurers or mortgage poolers can meet their
obligations under the policies, so that if the issuers default on their
obligations the holders of the security could sustain a loss. No insurance
or guarantee covers the Fund or the price of the Fund's shares. Mortgage-
related securities issued by non-governmental issuers generally offer a
higher rate of interest than government-agency and government-related
securities because there are no direct or indirect government guarantees of
payment. The Fund will not invest more than 5% of its assets in such
private entity securities issued by any one issuer, including any one bank
or savings and loan institution.
Commercial Mortgage-Related Securities--Commercial mortgage-related
securities generally are multi-class debt or pass-through certificates
secured by mortgage loans on commercial properties. These mortgage-related
securities generally are structured to provide protection to the senior
class investors against potential losses on the underlying mortgage loans.
This protection generally is provided by having the holders of subordinated
classes of securities ("Subordinated Securities") take the first loss if
there are defaults on the underlying commercial mortgage loans. Other
protection, which may benefit all of the classes or particular classes, may
include issuer guarantees, reserve funds, additional Subordinated
Securities, cross-collateralization and over-collateralization.
The Fund may invest in Subordinated Securities issued or sponsored by
commercial banks, savings and loan institutions, mortgage bankers, private
mortgage insurance companies and other non-governmental issuers.
Subordinated Securities have no governmental guarantee, and are subordinated
in some manner as to the payment of principal and/or interest to the holders
of more senior mortgage-related securities arising out of the same pool of
mortgages. The holders of Subordinated Securities typically are compensated
with a higher stated yield than are the holders of more senior mortgage-
related securities. On the other hand, Subordinated Securities typically
subject the holder to greater risk than senior mortgage-related securities
and tend to be rated in a lower rating category, and frequently a
substantially lower rating category, than the senior mortgage-related
securities issued in respect of the same pool of mortgages. Subordinated
Securities generally are likely to be more sensitive to changes in
prepayment and interest rates and the market for such securities may be less
liquid than is the case for traditional fixed-income securities and senior
mortgage-related securities.
The market for commercial mortgage-related securities developed more
recently and in terms of total outstanding principal amount of issues is
relatively small compared to the market for residential single-family
mortgage-related securities. In addition, commercial lending generally is
viewed as exposing the lender to a greater risk of loss than one-to four-
family residential lending. Commercial lending, for example, typically
involves larger loans to single borrowers or groups of related borrowers
than residential one to four-family mortgage loans. In addition, the
repayment of loans secured by income producing properties typically is
dependent upon the successful operation of the related real estate project
and the cash flow generated therefrom. Consequently, adverse changes in
economic conditions and circumstances are more likely to have an adverse
impact on mortgage-related securities secured by loans on commercial
properties than on those secured by loans on residential properties.
Collateralized Mortgage Obligations ("CMOs") -- A CMO is a multiclass bond
backed by a pool of mortgage pass-through certificates or mortgage loans.
CMOs may be collateralized by (a) pass-through certificates issued or
guaranteed by GNMA, FNMA or FHLMC, (b) unsecuritized mortgage loans insured
by the Federal housing Administration or guaranteed by the Department of
Veterans' Affairs, (c) unsecuritized conventional mortgages, (d) other
mortgage-related securities or (e) any combination thereof. Each class of
CMOs, often referred to as a "tranche," is issued at a specific coupon rate
and has a stated maturity or final distribution date. Principal prepayments
on collateral underlying a CMO may cause it to be retired substantially
earlier than the stated maturities or final distribution dates. The
principal and interest on the underlying mortgages may be allocated among
the several classes of a series of a CMO in many ways. One or more tranches
of a CMO may have coupon rates which reset periodically at a specified
increment over an index, such as the London Interbank Offered Rate
("LIBOR")(or sometimes more than one index). These Floating rate CMOs
typically are issued with lifetime caps on the coupon rate thereon. The
Fund also may invest in inverse floating rate CMOs. Inverse floating rate
CMOs constitute a tranche of a CMO with a coupon rate that moves in the
reverse direction to an applicable index such as the LIBOR. Accordingly,
the coupon rate thereon will increase as interest rates decrease. Inverse
floating rate CMOs are typically more volatile than fixed or floating rate
tranches of CMOs.
Many inverse floating rate CMOs have coupons that move inversely to a
multiple of the applicable indexes. The effect of the coupon varying
inversely to a multiple of an applicable index creates a leverage factors.
The markets for inverse floating rate CMOs with highly leveraged
characteristics may at times be very thin. The Fund's ability to dispose of
its positions in such securities will depend on the degree of liquidity in
the markets for such securities. It is impossible to predict the amount of
trading interest that may exist in such securities, and therefore the future
degree of liquidity. It should be noted that inverse floaters based on
multiples of a stated index are designed to be highly sensitive to changes
in interest rates and can subject the holders thereof to extreme reductions
of yield and loss of principal.
Stripped Mortgage-Backed Securities -- The Fund also my invest in stripped
mortgage-backed securities. Stripped mortgage-backed securities are created
by segregating the cash flows from underlying mortgage loans or mortgage
securities to create two or more new securities, each with a specified
percentage of the underlying security's principal or interest payments.
Mortgage securities may be partially stripped so that each investor class
receives some interest and some principal. When securities are completely
stripped, however, all of the interest is distributed to holders of one type
of security, known as an interest-only security, or IO, and all of the
principal is distributed to holders of another type of security known as a
principal-only security, or PO. Strips can be created in a pass-through
structure or as tranches of a CMO. The yields to maturity on IOs and POs
are very sensitive to the rate of principal payments (including prepayments)
on the related underlying mortgage assets. If the
underlying mortgage assets experience greater than anticipated prepayments
of principal, the Fund may not fully recoup its initial investment in IOs.
Conversely, if the underlying mortgage assets experience less than
anticipated prepayments of principal, the yield on POs could be materially
and adversely affected.
Real Estate Investment Trusts--A REIT is a corporation, or a business trust
that would otherwise be taxed as a corporation, which meets the definitional
requirements of the Internal Revenue Code of 1986, as amended (the "Code").
The Code permits a qualifying REIT to deduct dividends paid, thereby
effectively eliminating corporate level Federal income tax and making the
REIT a pass-through vehicle for Federal income tax purposes. To meet the
definitional requirements of the Code, a REIT must, among other things,
invest substantially all of its assets in interests in real estate
(including mortgages and other REITs) or cash and government securities,
derive most of its income form rents from real property or interest on loans
secured by mortgages on real property, and distribute to shareholders
annually a substantial portion of its otherwise taxable income.
REITs are characterized as equity REITs, mortgage REITs and hybrid
REITs. Equity REITs, which may include operating or finance companies, own
real estate directly and the value of, and income earned by, the REITs
depend upon the income of the underlying properties and the rental income
they earn. Equity REITs also can realize capital gains (or losses) by
selling properties that have appreciated (or depreciated) in value.
Mortgage REITs can make construction, development or long-term mortgage
loans and are sensitive to the credit quality of the borrower. Mortgage
REITs derive their income from interest payments on such loans. Hybrid
REITs combine the characteristics of both equity and mortgage REITs,
generally by holding both ownership interests and mortgage interests in real
estate. The value of securities issued by REITs are affected by tax and
regulatory requirements and by perceptions of management skill. They also
are subject to heavy cash flow dependency, defaults by borrowers or tenants,
self-liquidation and the possibility of failing to qualify for tax-free
status under the Code or to maintain exemption from the Investment Company
Act of 1940, as amended (the "1940 Act").
Adjustable-Rate Mortgage Loans ("ARMs")--ARMs eligible for inclusion in a
mortgage pool will generally provide for a fixed initial mortgage interest
rate for a specified period of time, generally for either the first three,
six, twelve, thirteen, thirty-six, or sixty scheduled monthly payments.
Thereafter, the interest rates are subject to periodic adjustment based on
changes in an index. ARMs typically have minimum and maximum rates beyond
which the mortgage interest rate may not vary over the lifetime of the
loans. Certain ARMs provide for additional limitations on the maximum
amount by which the mortgage interest rate may adjust for any single
adjustment period. Negatively amortizing ARMs may provide limitations on
changes in the required monthly payment. Limitations on monthly payments
can result in monthly payments that are greater or less than the amount
necessary to amortize a negatively amortizing ARM by its maturity at the
interest rate in effect during any particular month.
Other Mortgage-Related Securities -- Other mortgage-related securities
include securities other than those described above that directly or
indirectly represent a participation in, or are secured by and payable from,
mortgage loans on real property, including CMO residuals. Other mortgage-
related securities may be equity or debt securities issued by agencies or
instrumentalities of the U.S. Government or by private originators of, or
investors in, mortgage loans, including savings and loan associations,
homebuilders, mortgage banks, commercial banks, investment banks,
partnerships, trusts and special purpose entities of the foregoing.
Zero Coupon Securities. The Fund may invest in zero coupon U.S.
Treasury securities, which are Treasury Notes and Bonds that have been
stripped of their unmatured interest coupons, the coupons themselves and
receipts or certificates representing interests in such stripped debt
obligations and coupons. Receipts include "Treasury Receipts" ("TR's"),
"Treasury Investment Growth Receipts" ("TIGR's"), "Liquid Yield Option
Notes" ("LYON's"), and "Certificates of Accrual on Treasury Securities"
("CATS"). TIGR's, LYON's and CATS are interests in private proprietary
accounts while TR's are interests in accounts sponsored by the U.S.
Treasury.
Foreign Government Obligations; Securities of Supranational Entities.
The Fund may invest in obligations issued or guaranteed by one or more
foreign governments or any of their political subdivisions, agencies or
instrumentalities that are determined by the Manager to be of comparable
quality to the other obligations in which the Fund may invest. Such
securities also include debt obligations of supranational entities.
Supranational entities include international organizations designated or
supported by governmental entities to promote economic reconstruction or
development and international banking institutions and related government
agencies. Examples include the International Bank for Reconstruction and
Development (the World Bank), the European Coal and Steel Community, the
Asian Development Bank and the InterAmerican Development Bank.
Illiquid Securities. When purchasing securities that have not been
registered under the Securities Act of 1933, as amended, and are not readily
marketable, the Fund will endeavor, to the extent practicable, to obtain the
right to registration at the expense of the issuer. Generally, there will
be a lapse of time between the Fund's decision to sell any such security and
the registration of the security permitting sale. During any such period,
the price of the securities will be subject to market fluctuations.
However, where a substantial market of qualified institutional buyers has
developed for certain unregistered securities purchased by the Fund pursuant
to Rule 144A under the Securities Act of 1933, as amended, the Fund intends
to treat such securities as liquid securities in accordance with procedures
approved by the Fund's Board. Because it is not possible to predict with
assurance how the market for specific restricted securities sold pursuant to
Rule 144A will develop, the Fund's Board has directed the Manager to monitor
carefully the Fund's investments in such securities with particular regard
to trading activity, availability of reliable price information and other
relevant information. To the extent that, for a period of time, qualified
institutional buyers cease purchasing restricted securities pursuant to Rule
144A, the Fund's investing in such securities may have the effect of
increasing the level of illiquidity in its investment portfolio during such
period.
Management Policies
Lending Portfolio Securities. In connection with its securities
lending transactions, the Fund may return to the borrower or a third party
which is unaffiliated with the Fund, and which is acting as a "placing
broker," a part of the interest earned from the investment of collateral
received for securities loaned.
The Securities and Exchange Commission currently requires that the
following conditions must be met whenever portfolio securities are loaned:
(1) the Fund must receive at least 100% cash collateral from the borrower;
(2) the borrower must increase such collateral whenever the market value of
the securities rises above the level of such collateral; (3) the Fund must
be able to terminate the loan at any time; (4) the Fund must receive
reasonable interest on the loan, as well as any dividends, interest or other
distributions payable on the loaned securities, and any increase in market
value; and (5) the Fund may pay only reasonable custodian fees in connection
with the loan.
Derivatives. The Fund may invest in, or enter into, Derivatives (as
defined in the Fund's Prospectus) for a variety of reasons, including to
hedge certain market risks, to provide a substitute for purchasing or
selling particular securities or to increase potential income gain.
Derivatives may provide a cheaper, quicker or more specifically focused way
for the Fund to invest than "traditional" securities would. See "Portfolio
Securities--Mortgage-Related Securities" above.
Derivatives may be purchased on established exchanges or through
privately negotiated transactions referred to as over-the-counter
Derivatives. Exchange-traded Derivatives generally are guaranteed by the
clearing agency which is the issuer or counterparty to such Derivatives.
This guarantee usually is supported by a daily payment system (i.e.,
variation margin requirements) operated by the clearing agency in order to
reduce overall credit risk. As a result, unless the clearing agency
defaults, there is relatively little counterparty credit risk
associated with Derivatives purchased on an exchange. By contrast, no
clearing agency guarantees over-the-counter Derivatives. Therefore, each
party to an over-the-counter Derivative bears the risk that the counterparty
will default. Accordingly, the Manager will consider the creditworthiness
of counterparties to over-the-counter Derivatives in the same manner as it
would review the credit quality of a security to be purchased by the Fund.
Over-the-counter Derivatives are less liquid than exchange-traded
Derivatives since the other party to the transaction may be the only
investor with sufficient understanding of the Derivative to be interested in
bidding for it.
Forward Commitments. Securities purchased on a forward commitment or
when-issued basis are subject to changes in value (generally changing in the
same way, i.e., appreciating when interest rates decline and depreciating
when interest rates rise) based upon the public's perception of the
creditworthiness of the issuer and changes, real or anticipated, in the
level of interest rates. Securities purchased on a forward commitment or
when-issued basis may expose the Fund to risks because they may experience
such fluctuations prior to their actual delivery. Purchasing securities on
a when-issued basis can involve the additional risk that the yield available
in the market when the delivery takes place actually may be higher than that
obtained in the transaction itself. Purchasing securities on a forward
commitment or when-issued basis when the Fund is fully or almost fully
invested may result in greater potential fluctuation in the value of the
Fund's net assets and its net asset value per share.
Investment Considerations and Risks
Lower Rated Securities. The Fund may invest up to 5% of its assets in
securities rated Ba or B by Moody's Investors Service, Inc. ("Moody's") and
BB or B by Standard & Poor's Ratings Group ("S&P"). In no case, however,
will the Fund invest in bonds rated lower than B by Moody's and S&P. Such
securities, though higher yielding, are characterized by risk. See
"Appendix" for a general description of Moody's and S&P ratings. Although
ratings may be useful in evaluating the safety of interest and principal
payments, they do not evaluate the market value risk of these securities.
The Fund will rely on the Manager's judgment, analysis and experience in
evaluating the creditworthiness of an issuer.
Investors should be aware that the market values of many of these
securities tend to be more sensitive to economic conditions than are higher
rated securities. These securities generally are considered by S&P and
Moody's to be predominantly speculative with respect to capacity to pay
interest and repay principal in accordance with the terms of the obligation
and generally will involve more credit risk than securities in the higher
rating categories.
Companies that issue certain of these securities often are highly
leveraged and may not have available to them more traditional methods of
financing. Therefore, the risk associated with acquiring the securities of
such issuers generally is greater than is the case with higher rated
securities and will fluctuate over time. For example, during an economic
downturn or a sustained period of rising interest rates, highly leveraged
issuers of these securities may experience financial stress. During such
periods, such issuers may not have sufficient revenues to meet their
interest payment obligations. The issuer's ability to service its debt
obligations also may be affected adversely by specific corporate
developments, or the issuer's
inability to meet specific projected business forecasts, or the
unavailability of additional financing. The risk of loss because of default
by the issuer is significantly greater for the holders of these securities
because such securities generally are unsecured and often are subordinated
to other creditors of the issuer.
Because there is no established retail secondary market for many of
these securities, the Fund anticipates that such securities could be sold
only to a limited number of dealers or institutional investors. To the
extent a secondary trading market for these securities does exist, it
generally is not as liquid as the secondary market for higher rated
securities. The lack of a liquid secondary market may have an adverse
impact on market price and yield and the Fund's ability to dispose of
particular issues when necessary to meet liquidity needs or in response to a
specific economic event such as a deterioration in the creditworthiness of
the issuer. The lack of a liquid secondary market for certain securities
also may make it more difficult for the Fund to obtain accurate market
quotations for purposes of valuing the Fund's portfolio and calculating its
net asset value. Adverse publicity and investor perceptions, whether or not
based on fundamental analysis, may decrease the values and liquidity of
these securities. In such cases, judgment may play a greater role in
valuation because less reliable, objective data may be available.
These securities may be particularly susceptible to economic downturns.
It is likely that any economic recession could disrupt severely the market
for such securities and may have an adverse impact on the value of such
securities. In addition, it is likely that any such economic downturn could
adversely affect the ability of the issuers of such securities to repay
principal and pay interest thereon and increase the incidence of default for
such securities.
The Fund may acquire these securities during an initial offering. Such
securities may involve special risks because they are new issues. The Fund
has no arrangement with any persons concerning the acquisition of such
securities, and the Manager will review carefully the credit and other
characteristics pertinent to such new issues.
Investment Restrictions
The Fund has adopted investment restrictions numbered 1 through 11 as
fundamental policies, which cannot be changed without approval by the
holders of a majority (as defined in the 1940 Act of the Fund's outstanding
voting shares. Investment restrictions numbered 12 and 13 are not
fundamental policies and may be changed by vote of a majority of the Fund's
Board members at any time. The Fund may not:
1. Purchase common stocks, preferred stocks, warrants, other equity
securities or convertible bonds.
2. Borrow money, except to the extent permitted under the 1940 Act
(which currently limits borrowing to no more than 33-1/3% of the value of
the Fund's total assets).
3. Sell securities short.
4. Write or purchase put or call options.
5. Underwrite the securities of other issuers.
6. Purchase or sell real estate, commodities or oil and gas
interests.
7. Make loans to others, except through the purchase of debt
obligations referred to under "Description of the Fund--Management Policies"
in the Fund's Prospectus and "Investment Objective and Management Policies"
in this Statement of Additional Information. However, the Fund's Board may,
on the request of broker-dealers or other institutional investors which it
deems qualified, authorize the Fund to lend securities, but only when the
borrower pledges cash or equivalent securities as collateral to the Fund and
agrees to maintain such collateral so that it amounts to at least 100% of
the value of the securities. No such security loan will be made if, as a
result, the aggregate of loans exceeds 10% of the value of the Fund's total
assets.
8. Invest more than 5% of its total assets in the securities of any
one issuer except for U.S. Government and government agency securities which
may be purchased without limitation.
9. Invest in companies for the purpose of exercising control.
10. Invest in securities of other investment companies, except as they
may be acquired as part of a merger, consolidation or acquisition of assets.
11. Invest more than 25% of its total assets in any particular
industry or industries.
12. Enter into repurchase agreements providing for settlement in more
than seven days after notice or purchase securities which are illiquid if,
in the aggregate, more than 15% of the value of the Fund's net assets would
be so invested.
13. Pledge, mortgage, hypothecate or otherwise encumber its assets,
except to the extent necessary to secure permitted borrowings.
If a percentage restriction is adhered to at the time of investment, a
later change in percentage resulting from a change in values of assets will
not constitute a violation of such restriction.
The Fund may make commitments more restrictive than the restrictions
listed above so as to permit the sale of Fund shares in certain states.
Should the Fund determine that a commitment is no longer in the best
interests of the Fund and its shareholders, the Fund reserves the right to
revoke the commitment by terminating the sale of Fund shares in the state
involved.
MANAGEMENT OF THE FUND
Board members and officers of the Fund, together with information as to
their principal business occupations during at least the last five years,
are shown below.
Board Members of the Fund
JOSEPH S. DiMARTINO, Chairman of the Board. Since January 1995, Chairman of
the Board of various funds in the Dreyfus Family of Funds. He is also
Chairman of the Board of Directors of Noel Group, Inc., a venture
capital company, and Staffing Resources, Inc., a temporary placement
service agency; and a director of The Muscular Dystrophy Association,
HealthPlan Services Corporation, a provider of marketing,
administrative and risk management services to health and other benefit
programs, Carlyle Industries, Inc. (formerly, Belding Heminway Company,
Inc.), a button packager and distributor, and Curtis Industries, Inc.,
a national distributor of security products, chemicals, and automotive
and other hardware. For more than five years prior to January 1995, he
was President, and a director and, until August 1994, Chief Operating
Officer of the Manager, and Executive Vice President and a director of
Dreyfus Service Corporation, a wholly-owned subsidiary of the Manager
and, until August 24, 1994, the Fund's distributor. From August 1994
to December 31, 1994, he was a director of Mellon Bank Corporation.
Mr. DiMartino is 54 years old and his address is 200 Park Avenue, New
York, New York 10166.
DAVID P. FELDMAN, Board Member. Trustee of Corporate Property Investors, a
real estate investment company, and a director of several mutual funds
in the 59 Wall Street Mutual Funds Group and the Jeffrey Company, a
private investment company. From July 1961 until his retirement in
April 1997, he was employed by AT&T Investment Management Corporation,
principally serving as Chairman and Chief Executive Officer. Mr.
Feldman is 58 years old and his address is c/o AT&T, One Oak Way,
Berkeley Heights, New Jersey 07922.
JOHN M. FRASER, JR., Board Member. President of Fraser Associates, a
service company for planning and arranging corporate meetings and other
events. From September 1975 to June 1978, he was Executive Vice
President of Flagship Cruises, Ltd. Prior thereto, he was Senior Vice
President and Resident Director of the Swedish-American Line for the
United States and Canada. Mr. Fraser is 76 years old and his address
is 133 East 64th Street, New York, New York 10021.
ROBERT R. GLAUBER, Board Member. Research Fellow, Center for Business and
Government at the John F. Kennedy School of Government, Harvard
University, since January 1992. He is also a director of Mid Ocean
Reinsurance Co., Ltd., Cooke & Bieler, Inc., investment counselors,
NASD Regulation, Inc. and the Federal Reserve Bank of Boston. He was
Under Secretary of the Treasury for Finance at the U.S. Treasury
Department from May 1989 to January 1992. For more than five years
prior thereto, he was a Professor of Finance at the Graduate School of
Business Administration of Harvard University. He is 58 years old and
his address is 79 John F. Kennedy Street, Cambridge, Massachusetts
02138.
JAMES F. HENRY, Board Member. President of the CPR Institute for Dispute
Resolution, a non-profit organization principally engaged in the
development of alternatives to business litigation. He was of counsel
to the law firm of Lovejoy, Wasson & Ashton from October 1975 to
December 1976 and from October 1979 to June 1983, and was a partner of
that firm from January 1977 to September 1979. He was President and a
director of the Edna McConnell Clark Foundation, a philanthropic
organization, from September 1971 to December 1976. Mr. Henry is 66
years old and his address is c/o CPR Institute for Dispute Resolution,
366 Madison Avenue, New York, New York 10017.
ROSALIND GERSTEN JACOBS, Board Member. Director of Merchandise and
Marketing for Corporate Property Investors, a real estate investment
company. From 1974 to 1976, she was owner and manager of a merchandise
and marketing consulting firm. Prior to 1974, she was a Vice
President of Macy's, New York. Mrs. Jacobs is 72 years old and her
address is c/o Corporate Property Investors, 305 East 47th Street, New
York, New York 10017.
IRVING KRISTOL, Board Member. John M. Olin Distinguished Fellow of the
American Enterprise Institute for Public Policy Research, co-editor of
The Public Interest magazine and an author or co-editor of several
books. From May 1981 to December 1994, he was a consultant to the
Manager on economic matters; from 1969 to 1988, he was Professor of
Social Thought at the Graduate School of Business Administration, New
York University; and from September 1969 to August 1979, he was Henry
R. Luce Professor of Urban Values at New York University. Mr. Kristol
is 77 years old and his address is c/o The Public Interest, 1112 16th
Street, N.W., Suite 530, Washington, D.C. 20036.
DR. PAUL A. MARKS, Board Member. President and Chief Executive Officer of
Memorial Sloan-Kettering Cancer Center. He is also director emeritus
of Pfizer, Inc., a pharmaceutical company, where he served as a
director from 1978 to 1996; a director of Tularik, Inc., a
biotechnology company; and a general partner of LINC Venture Lease
Partners II, L.P., a limited partnership engaged in leasing. He was
Vice President for Health Sciences and Director of the Cancer Center at
Columbia University from 1973 to September 1980; Professor of Medicine
and of Human Genetics and Development at Columbia University from 1968
to 1982; and a director of Life Technologies Inc., a life service
company producing products for cell and molecular biology and
microbiology from 1986 to 1996, Biotechnology General, Inc., a
biotechnology development company from 1992 to 1993; and National
Health Laboratories, a national clinical diagnostic laboratory from
1991 to 1995. Dr. Marks is 71 years old and his address is c/o
Memorial Sloan-Kettering Cancer Center, 1275 York Avenue, New York, New
York 10021.
DR. MARTIN PERETZ, Board Member. Editor-in-Chief of The New Republic
magazine and a lecturer in social studies at Harvard University, where
he has been a member of the faculty since 1965. He is a trustee of the
Center for Blood Research at the Harvard Medical School and of the
Academy for Liberal Education, an accrediting agency for colleges and
universities certified by the U.S. Department of Education, a director
of LeukoSite Inc., a biopharmaceutical company, and Co-chairman of
TheStreet.com, a financial daily on the Web. From 1988 to 1989, he was
a director of Bank Leumi Trust Company of New York; and from 1988 to
1991, he was a director of Carmel Container Corporation. Dr. Peretz is
58 years old and his address is c/o The New Republic, 1220 19th Street,
N.W., Washington, D.C. 20036.
BERT W. WASSERMAN, Board Member. Financial Consultant. He is also a
director of The New Germany Fund, Mountasia Entertainment
International, Inc., the Lillian Vernon Corporation, Winstar
Communications, Inc. and International Discounts Telecommunications
Corporation. From January 1990 to March 1995, Executive Vice President
and Chief Financial Officer, and from January 1990 to March 1993, a
director, of Time Warner Inc.; from 1981 to 1990, he was a member of
the office of the President and a director of Warner Communications,
Inc. Mr. Wasserman is 64 years old and his address is 126 East 56th
Street, Suite 12 North, New York, New York 10022-3613.
For so long as the Fund's plan described in the section captioned
"Shareholder Services Plan" remains in effect, the Board members of the Fund
who are not "interested persons" of the Fund, as defined in the 1940 Act,
will be selected and nominated by the Board members who are not "interested
persons" of the Fund.
The Fund typically pays its Board members an annual retainer and a per
meeting fee and reimburses them for their expenses. The Chairman of the
Board receives an additional 25% of such compensation. Emeritus Board
members are entitled to receive an annual retainer and a per meeting fee of
one-half the amount paid to them as Board members. The aggregate amount of
compensation paid to each Board member by the Fund for the fiscal year ended
March 31, 1997 and by all other funds in the Dreyfus Family of Funds for
which such person is a Board member (the number of which is set forth in
parenthesis next to each Board member's total compensation) for the year
ended December 31, 1996, were as follows:
Total
Compensation from
Aggregate Fund and Fund
Name of Board Compensation from Complex Paid to
Member Fund* Board Members
Joseph S. DiMartino $6,250 $517,075 (93)
David P. Feldman $5,000 $122,257 (25)
John M. Fraser, Jr. $5,000 $ 73,563 (14)
Robert R. Glauber $5,000 $103,549 (20)
James F. Henry $5,000 $ 59,973 (10)
Rosalind Gersten Jacobs $5,000 $ 93,900 (20)
Irving Kristol $5,000 $ 59,973 (10)
Dr. Paul A. Marks $4,500 $ 55,223 (10)
Dr. Martin Peretz $5,000 $ 59,973 (10)
Bert W. Wasserman $5,000 $ 59,973 (10)
___________________________
* Amount does not include reimbursed expenses for attending Board
meetings, which amounted to $1,907 for all Board members as a group.
Officers of the Fund
MARIE E. CONNOLLY, President and Treasurer. President, Chief Executive
Officer and a director of the Distributor and Funds Distributor, Inc.,
the ultimate parent of which is Boston Institutional Group, Inc., and
an officer of other investment companies advised or administered by the
Manager. She is 40 years old.
RICHARD W. INGRAM, Vice President and Assistant Treasurer. Executive Vice
President of the Distributor and Funds Distributor, Inc., and an
officer of other investment companies advised or administered by the
Manager. From March 1994 to November 1995, he was Vice President and
Division Manager of First Data Investor Services Group; and from 1989
to 1994, he was Vice President, Assistant Treasurer and Tax Director -
Mutual Funds of The Boston Company. He is 42 years old.
MARY A. NELSON, Vice President and Assistant Treasurer. Vice President of
the Distributor and Funds Distributor, Inc., and an officer of other
investment companies advised or administered by the Manager. From
September 1989 to July 1994, she was an Assistant Vice President and
Client Manager for The Boston Company. She is 33 years old.
MICHAEL S. PETRUCELLI, Vice President and Assistant Treasurer. Senior Vice
President of Funds Distributor, Inc., and an officer of other
investment companies advised or administered by the Manager. From
December 1989 through November 1996, he was employed by GE Investments
where he held various financial, business development and compliance
positions. He also served as Treasurer of the GE Funds and a director
of GE Investment Services. He is 36 years old.
JOSEPH F. TOWER, III, Vice President and Assistant Treasurer. Senior Vice
President, Treasurer and Chief Financial Officer and a director of the
Distributor and Funds Distributor, Inc., and an officer of other
investment companies advised or administered by the Manager. From July
1988 to August 1994, he was employed by The Boston Company, Inc. where
he held various management positions in the Corporate Finance and
Treasury areas. He is 35 years old.
DOUGLAS C. CONROY, Vice President and Assistant Secretary. Assistant Vice
President of Funds Distributor, Inc., and an officer of other
investment companies advised or administered by the Manager. From
April 1993 to January 1995, he was a Senior Fund Accountant for
Investors Bank & Trust Company; and from December 1991 to March 1993,
he was employed as a Fund Accountant at The Boston Company, Inc.. He
is 28 years old.
ELIZABETH A. KEELEY, Vice President and Assistant Secretary. Vice President
of the Distributor and Funds Distributor, Inc., and an officer of other
investment companies advised or administered by the Manager. She has
been employed by the Distributor since September 1995. She is 28 years
old.
The address of each officer of the Fund is 200 Park Avenue, New York,
New York 10166.
The Fund's Board members and officers, as a group, owned less than 1%
of the Fund's shares outstanding on July 8, 1997.
As of July 8, 1997, Nationwide QPVA, c/o IPO Co. 67, Post Office Box
182029, Columbus, Ohio, owned beneficially 7.924% of the Fund's outstanding
shares.
MANAGEMENT AGREEMENT
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Management of the Fund."
The Manager provides management services pursuant to the Management
Agreement (the "Agreement") dated August 24, 1994, with the Fund, which is
subject to annual approval by (i) the Fund's Board or (ii) vote of a
majority (as defined in the 1940 Act) of the outstanding voting securities
of the Fund, provided that in either event its continuance also is approved
by a majority of the Board members who are not "interested persons" (as
defined in the 1940 Act) of the Fund or the Manager, by vote cast in person
at a meeting called for the purpose of voting on such approval.
Shareholders approved the Agreement on August 2, 1994. The Fund's Board,
including a majority of its members who are not "interested persons" of any
party to the Agreement, last voted to renew the Agreement at a meeting held
on September 9, 1996. The Agreement is terminable without penalty, on 60
days' notice, by the Fund's Board or by vote of a majority of the Fund's
shares or, upon not less than 90 days notice, by the Manager. The Agreement
will terminate automatically in the event of its assignment (as defined in
the 1940 Act).
The following persons are officers and/or directors of the Manager: W.
Keith Smith, Chairman of the Board; Christopher M. Condron, President, Chief
Executive Officer, Chief Operating Officer and a director; Stephen E.
Canter, Vice Chairman, Chief Investment Officer and a director; Lawrence S.
Kash, Vice Chairman--Distribution and a director; William T. Sandalls, Jr.,
Senior Vice President and Chief Financial Officer; Mark N. Jacobs, Vice
President, General Counsel and Secretary; Patrice M. Kozlowski, Vice
President--Corporate Communications; Mary Beth Leibig, Vice President--Human
Resources; Jeffrey N. Nachman, Vice President--Mutual Fund Accounting;
Andrew S. Wasser, Vice President--Information Systems; William V. Healey,
Assistant Secretary; and Mandell L. Berman, Burton C. Borgelt, Frank V.
Cahouet and Richard F. Syron, directors.
The Manager manages the Fund's portfolio of investments in accordance
with the stated policies of the Fund, subject to the approval of the Fund's
Board. The Manager is responsible for investment decisions and provides the
Fund with portfolio managers who are authorized by the Board to execute
purchases and sales of securities. The Fund's portfolio managers, who
comprise the Manager's Taxable Fixed-Income Committee, are Kevin M.
McClintock, Michael Hoeh, Roger King, C. Matthew Olson and Gerald E.
Thunelius. The Manager also maintains a research department with a
professional staff of portfolio managers and securities analysts who provide
research services for the Fund and for other funds advised by the Manager.
The Manager maintains office facilities on behalf of the Fund and
furnishes statistical and research data, clerical help, accounting, data
processing, bookkeeping and internal auditing and certain other required
services to the Fund. The Manager may make such advertising and promotional
expenditures, using its own resources, as it from time to time deems
appropriate.
The Manager, from time to time, from its own funds, other than the
management fee paid by the Fund, but including past profits, may make
payments to the Distributor for shareholder servicing. The Distributor in
turn may pay part or all of such compensation to securities dealers or other
persons for their servicing assistance.
All expenses incurred in the operation of the Fund are borne by the
Fund, except to the extent specifically assumed by the Manager. The
expenses borne by the Fund include: taxes, interest, brokerage fees and
commissions, if any, fees of directors who are not officers, directors,
employees or holders of 5% or more of the outstanding voting securities of
the Manager, Securities and Exchange Commission fees, state Blue Sky
qualification fees, advisory fees, charges of custodians, transfer and
dividend disbursing agents' fees, certain insurance premiums, industry
association fees, outside auditing and legal expenses, costs of independent
pricing services, costs of maintaining corporate existence, costs
attributable to investor services (including, without limitation, telephone
and personnel expenses), costs of shareholders' reports and meetings, costs
of preparing and printing prospectuses and statements of additional
information for regulatory purposes and for distribution to existing
shareholders, and any extraordinary expenses.
As compensation for the Manager's services, the Fund has agreed to pay
the Manager a monthly management fee at the annual rate of .65 of 1% of the
value of the Fund's average daily net assets. All expenses are accrued
daily and deducted before declaration of dividends to investors. The
management fees paid by the Fund to the Manager for the fiscal years ended
March 31, 1995, 1996 and 1997 amounted to $3,422,106, $3,798,630 and
$3,885,766, respectively.
The Manager has agreed that if the aggregate expenses of the Fund,
excluding taxes, brokerage commissions and, with the prior written consent
of the necessary state securities commissions, extraordinary expenses, but
including the management fee, exceed 1 1\2% of the average value of the Fund's
net assets for the fiscal year, the Fund may deduct from the fees to be paid
to the Manager, or the Manager will bear such excess expenses. No expense
reimbursement was required under the Agreement for fiscal 1995, 1996 and
1997.
The aggregate of the fees payable to the Manager is not subject to
reduction as the value of the Fund's net assets increases.
PURCHASE OF SHARES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "How to Buy Shares."
The Distributor. The Distributor serves as the Fund's distributor on a
best efforts basis pursuant to an agreement which is renewable annually.
The Distributor also acts as distributor for the other funds in the Dreyfus
Family of Funds and for certain other investment companies.
Dreyfus TeleTransfer Privilege. Dreyfus TeleTransfer purchase orders
may be made at any time. Purchase orders received by 4:00 p.m., New York
time, on any business day that Dreyfus Transfer, Inc., the Fund's transfer
and dividend disbursing agent (the "Transfer Agent"), and the New York Stock
Exchange are open for business will be credited to the shareholder's Fund
account on the next bank business day following such purchase order.
Purchase orders made after 4:00 p.m., New York time, on any business day the
Transfer Agent and the New York Stock Exchange are open for business, or
orders made on Saturday, Sunday or any Fund holiday (e.g., when the New York
Stock Exchange is not open for business), will be credited to the
shareholder's Fund account on the second bank business day following such
purchase order. To qualify to use the Dreyfus TeleTransfer Privilege, the
initial payment for purchase of shares must be drawn on, and redemption
proceeds paid to, the same bank and account as are designated on the Account
Application or Shareholder Services Form on file. If the proceeds of a
particular redemption are to be wired to an account at any other bank, the
request must be in writing and signature-guaranteed. See "Redemption of
Shares--Dreyfus TeleTransfer Privilege."
Transactions Through Securities Dealers. Fund shares may be purchased
and redeemed through securities dealers which may charge a fee for such
services. Some dealers will place the Fund's shares in an account with
their firm. Dealers also may require the following: that the customer
invest more than the $1,000 minimum investment through dealers; the customer
not take physical delivery of stock certificates; the customer not request
redemption checks to be issued in the customer's name; fractional shares not
be purchased; monthly income distributions be taken in cash; or other
conditions.
There is no sales or service charge by the Fund or the Distributor,
although investment dealers, banks and other financial institutions may make
reasonable charges to investors for their services. The services provided
and the applicable fees are established by each dealer or other institution
acting independently of the Fund. The Fund has been given to understand
that these fees may be charged for customer services including, but not
limited to, same-day investment of client funds; same-day access to client
funds; advice to customers about the status of their accounts, yield
currently being paid or income earned to date; provision of periodic account
statements showing security and money market positions; other services
available from the dealer, bank or other institution; and assistance with
inquiries related to their investment. Any such fees will be deducted
monthly from the investor's account, which on smaller accounts could
constitute a substantial portion of distributions. Small, inactive,
long-term accounts involving monthly service charges may not be in the best
interest of investors. Investors should be aware that they may purchase
shares of the Fund directly from the Fund without imposition of any
maintenance or service charges, other than those already described herein.
Reopening an Account. An investor may reopen an account with a minimum
investment of $100 without filing a new Account Application during the
calendar year the account is closed or during the following calendar year,
provided the information on the old Account Application is still applicable.
SHAREHOLDER SERVICES PLAN
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Shareholder Services
Plan."
The Fund has adopted a Shareholder Services Plan (the "Plan") pursuant
to which the Fund reimburses Dreyfus Service Corporation for certain
allocated expenses of providing personal services and/or maintaining
shareholder accounts. The services provided may include personal services
related to shareholder accounts, such as answering shareholder inquiries
regarding the Fund and providing reports and other information, and
services related to the maintenance of shareholder accounts.
A quarterly report of the amounts expended under the Plan, and the
purposes for which such expenditures were incurred, must be made to the
Board for its review. In addition, the Plan provides that material
amendments of the Plan must be approved by the Board and by the Board,
members who are not "interested persons" (as defined in the 1940 Act) of the
Fund and have no direct or indirect financial interest in the operation of
the Plan by vote cast in person at a meeting called for the purpose of
considering such amendments. The Plan is subject to annual approval by such
vote of the Board members cast in person at a meeting called for the purpose
of voting on the Plan. The Plan was last so approved on May 29, 1996. The
Plan is terminable at any time by vote of a majority of the Board members
who are not "interested persons" and have no direct or indirect financial
interest in the operation of the Plan.
For the fiscal year ended March 31, 1997, the Fund was charged
$1,007,283 pursuant to the Plan.
REDEMPTION OF SHARES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "How to Redeem Shares."
Check Redemption Privilege. The Fund provides Redemption Checks
("Checks") automatically upon opening an account, unless the investor
specifically refuses the Check Redemption Privilege by checking the
applicable "No" box on the Account Application. Checks will be sent only to
the registered owner(s) of the account and only to the address of record.
The Check Redemption Privilege may be established for an existing account by
a separate signed Shareholder Services Form. The Account Application or
Shareholder Services Form must be manually signed by the registered
owner(s). Checks are drawn on the investor's Fund account and may be made
payable to the order of any person in an amount of $500 or more. When a
Check is presented to the Transfer Agent for payment, the Transfer Agent, as
the investor's agent, will cause the Fund to redeem a sufficient number of
shares in the investor's account to cover the amount of the Check.
Dividends are earned until the Check clears. After clearance, a copy of the
Check will be returned to the investor. Shareholders generally will be
subject to the same rules and regulations that apply to checking accounts,
although the election of this Privilege creates only a shareholder-transfer
agent relationship with the Transfer Agent.
If the amount of the Check is greater than the value of the shares in
the investor's account, the Check will be returned marked insufficient
funds. Checks should not be used to close an account.
Wire Redemption Privilege. By using this Privilege, the investor
authorizes the Transfer Agent to act on wire, telephone or letter redemption
instructions (including over The Dreyfus Touchr automated telephone system)
from any person representing himself or herself to be the investor and
reasonably believed by the Transfer Agent to be genuine. Ordinarily, the
Fund will initiate payment for shares redeemed pursuant to this Privilege on
the next business day after receipt if the Transfer Agent receives the
redemption request in proper form. Redemption proceeds ($1,000 minimum)
will be transferred by Federal Reserve wire only to the commercial bank
account specified by the investor on the Account Application or Shareholder
Services Form, or to a correspondent bank if the investor's bank is not a
member of the Federal Reserve System. Fees ordinarily are imposed by such
bank and borne by the investor. Immediate notification by the correspondent
bank to the investor's bank is necessary to avoid a delay in crediting the
funds to the investor's bank account.
Investors with access to telegraphic equipment may wire redemption
requests to the Transfer Agent by employing the following transmittal code
which may be used for domestic or overseas transmissions:
Transfer Agent's
Transmittal Answer Back Sign
144295 144295 TSSG PREP
Investors who do not have direct access to telegraphic equipment may
have the wire transmitted by contacting a TRT Cables operator at
1-800-654-7171, toll free. Investors should advise the operator that the
above transmitted code must be used and should also inform the operator of
the Transfer Agent's answer back sign.
To change the commercial bank or account designated to receive
redemption proceeds, a written request must be sent to the Transfer Agent.
This request must be signed by each shareholder, with each signature
guaranteed as described below under "Stock Certificates; Signatures."
Dreyfus TeleTransfer Privilege. Investors should be aware that if they
have selected the Dreyfus TeleTransfer Privilege, any request for a wire
redemption will be effected as a Dreyfus TeleTransfer transaction through
the Automated Clearing House ("ACH") system unless more prompt transmittal
specifically is requested. Redemption proceeds will be on deposit in the
investor's account at an ACH member bank ordinarily two business days after
receipt of the redemption request. See "Purchase of Shares--Dreyfus
TeleTransfer Privilege."
Stock Certificates; Signatures. Any certificates representing Fund
shares to be redeemed must be submitted with the redemption request.
Written redemption requests must be signed by each shareholder, including
each owner of a joint account, and each signature must be guaranteed.
Signatures on endorsed certificates submitted for redemption also must be
guaranteed. The Transfer Agent has adopted standards and procedures
pursuant to which signature-guarantees in proper form generally will be
accepted from domestic banks, brokers, dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies
and savings associations, as well as from participants in the New York Stock
Exchange Medallion Signature Program, the Securities Transfer Agents
Medallion Program ("STAMP") and the Stock Exchanges Medallion Program.
Guarantees must be signed by an authorized signatory of the guarantor and
"Signature-Guaranteed" must appear with the signature. The Transfer Agent
may request additional documentation from corporations, executors,
administrators, trustees or guardians, and may accept other suitable
verification arrangements from foreign investors, such as consular
verification. For more information with respect to signature-guarantees,
please call one of the telephone numbers listed on the cover.
Redemption Commitment. The Fund has committed itself to pay in cash
all redemption requests by any shareholder of record, limited in amount
during any 90-day period to the lesser of $250,000 or 1% of the value of the
Fund's net assets at the beginning of such period. Such commitment is
irrevocable without the prior approval of the Securities and Exchange
Commission. In the case of requests for redemption in excess of such
amount, the Fund's Board reserves the right to make payments in whole or
part in securities or other assets of the Fund in case of an emergency or
any time a cash distribution would impair the liquidity of the Fund to the
detriment of the existing shareholders. In such event, the securities would
be valued in the same manner as the Fund's portfolio is valued. If the
recipient sold such securities, brokerage charges might be incurred.
Suspension of Redemptions. The right of redemption may be suspended or
the date of payment postponed (a) during any periods when the New York Stock
Exchange is closed (other than customary weekend and holiday closings), (b)
when trading in the markets the Fund ordinarily utilizes is restricted, or
when an emergency exists as determined by the Securities and Exchange
Commission so that disposal of the Fund's investments or determination of
its net asset value is not reasonably practicable, or (c) for such other
periods as the Securities and Exchange by order may permit to protect the
Fund's shareholders.
SHAREHOLDER SERVICES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Shareholder Services."
Fund Exchanges. Shares of other funds purchased by exchange will be
purchased on the basis of net asset value per share as follows:
A. Exchanges for shares of funds that are offered without a
sales load will be made without a sales load.
B. Shares of funds purchased without a sales load may be
exchanged for shares of other funds sold with a sales load, and
the applicable sales load will be deducted.
C. Shares of funds previously purchased with a sales load may be
exchanged without a sales load for shares of other funds sold
without a sales load.
D. Shares of funds purchased with a sales load, shares of funds
acquired by a previous exchange from shares purchased with a sales
load, and additional shares acquired through reinvestment of
dividends or distributions of any such funds (collectively
referred to herein as "Purchased Shares") may be exchanged for
shares of other funds sold with a sales load (referred to herein
as "Offered Shares"), provided that, if the sales load applicable
to the Offered Shares exceeds the maximum sales load that could
have been imposed in connection with the Purchased Shares (at the
time the Purchased Shares were acquired), without giving effect to
any reduced loads, the difference will be deducted.
To accomplish an exchange under item D above, shareholders must notify
the Transfer Agent of their prior ownership of fund shares and their account
number.
To request an exchange, an investor must give exchange instructions to
the Transfer Agent in writing or by telephone. The ability to issue
exchange instructions by telephone is given to all Fund shareholders
automatically, unless the investor checks the applicable "No" box on the
Account Application, indicating that the investor specifically refuses this
privilege. By using the Telephone Exchange Privilege, the investor
authorizes the Transfer Agent to act on telephonic instructions (including
over The Dreyfus Touchr automated telephone system) from any person
representing himself or herself to be the investor, and reasonably believed
by the Transfer Agent to be genuine. Telephone exchanges may be subject to
limitations as to the amount involved or the number of telephone exchanges
permitted. Shares issued in certificate form are not eligible for telephone
exchange.
To establish a personal retirement plan by exchange, shares of the fund
being exchanged must have a value of at least the minimum initial investment
required for the fund into which the exchange is being made. For
Dreyfus-sponsored Keogh Plans, IRAs and IRAs set up under a Simplified
Employee Pension Plan ("SEP-IRAs") with only one participant, the minimum
initial investment is $750. To exchange shares held in corporate plans,
403(b)(7) Plans and SEP-IRAs with more than one participant, the minimum
initial investment is $100 if the plan has at least $2,500 invested among
the funds in the Dreyfus Family of Funds. To exchange shares held in
personal retirement plans, the shares exchanged must have a current value of
at least $100.
Dreyfus Auto-Exchange Privilege. Dreyfus Auto-Exchange Privilege
permits an investor to purchase, in exchange for shares of the Fund, shares
of certain other funds in the Dreyfus Family of Funds. This Privilege is
available only for existing accounts. Shares will be exchanged on the basis
of relative net asset value set forth above under "Fund Exchanges."
Enrollment in or modification or cancellation of this Privilege is effective
three business days following notification by the investor. An investor
will be notified if his account falls below the amount designated to be
exchanged under this Privilege. In this case, an investor's account will
fall to zero unless additional investments are made in excess of the
designated amount prior to the next Dreyfus Auto-Exchange transaction.
Shares held under IRA and other retirement plans are eligible for this
Privilege. Exchanges of IRA shares may be made between IRA accounts and
from regular accounts to IRA accounts, but not from IRA accounts to regular
accounts. With respect to all other retirement accounts, exchanges may be
made only among those accounts.
Fund Exchanges and the Dreyfus Auto-Exchange Privilege are available to
shareholders resident in any state in which shares of the fund being
acquired legally may be sold. Shares may be exchanged only between accounts
having identical names and other identifying designations.
Shareholder Services Forms and prospectuses of the other funds may be
obtained by calling 1-800-645-6561. The Fund reserves the right to reject
any exchange request in whole or in part. The Fund Exchanges service or
Dreyfus Auto-Exchange Privilege may be modified or terminated any time upon
notice to shareholders.
Automatic Withdrawal Plan. The Automatic Withdrawal Plan permits an
investor with a $5,000 minimum account to request withdrawal of a specified
dollar amount (minimum of $50) on either a monthly or quarterly basis.
Withdrawal payments are the proceeds from sales of Fund shares, not the
yield on the shares. If withdrawal payments exceed reinvested dividends and
distributions, the investor's shares will be reduced and eventually may be
depleted. Automatic Withdrawal may be terminated at any time by the
investor, the Fund or the Transfer Agent. Shares for which certificates
have been issued may not be redeemed through the Automatic Withdrawal Plan.
Dreyfus Dividend Sweep. Dreyfus Dividend Sweep allows investors to
invest automatically their dividends or dividends and capital gain
distributions, if any, from the Fund in shares of another fund in the
Dreyfus Family of Funds of which the investor is a shareholder. Shares of
other funds purchased pursuant to this privilege will be purchased on the
basis of relative net asset value per share as follows:
A. Dividends and distributions paid by a fund may be invested
without imposition of a sales load in shares of other funds that
are offered without a sales load.
B. Dividends and distributions paid by a fund which does not
charge a sales load may be invested in shares of other funds sold
with a sales load, and the applicable sales load will be deducted.
C. Dividends and distributions paid by a fund which charges a
sales load may be invested in shares of other funds sold with a
sales load (referred to herein as "Offered Shares"), provided
that, if the sales load applicable to the Offered Shares exceeds
the maximum sales load charged by the fund from which dividends or
distributions are being swept, without giving effect to any
reduced loads, the difference will be deducted.
D. Dividends and distributions paid by a fund may be invested in
shares of other funds that impose a contingent deferred sales
charge ("CDSC") and the applicable CDSC, if any, will be imposed
upon redemption of such shares.
Corporate Pension/Profit-Sharing and Personal Retirement Plans. The
Fund makes available to corporations a variety of prototype pension and
profit-sharing plans including a 401(k) Salary Reduction Plan. In addition,
the Fund makes available Keogh Plans, IRAs, including SEP-IRAs, IRA
"Rollover Accounts" and 403(b)(7) Plans. Plan support services also are
available.
Investors who wish to purchase Fund shares in conjunction with a Keogh
Plan, a 403(b)(7) Plan or an IRA, including a SEP-IRA, may request forms for
adoption of such plans from the Distributor.
The entity acting as custodian for Keogh Plans, 403(b)(7) Plans or IRAs
may charge a fee, payment of which could require the liquidation of shares.
All fees charged are described in the appropriate form.
Shares may be purchased in connection with these plans only by direct
remittance to the entity acting as custodian. Purchases for these plans may
not be made in advance of receipt of funds.
The minimum initial investment for corporate plans, Salary Reduction
Plans, 403(b)(7) Plans and SEP-IRAs with more than one participant is
$2,500, with no minimum on subsequent purchases. The minimum initial
investment for Dreyfus-sponsored Keogh Plans, IRAs, SEP-IRAs and 403(b)(7)
Plans with only one participant is normally $750, with no minimum on
subsequent purchases. Individuals who open an IRA may also open a
non-working spousal IRA with a minimum investment of $250.
The investor should read the Prototype Retirement Plan and the form of
Custodial Agreement for further details on eligibility, service fees and tax
implications, and should consult a tax adviser.
PORTFOLIO TRANSACTIONS
Purchases and sales of portfolio securities usually are principal
transactions. Portfolio securities ordinarily are purchased directly from
the issuer or from an underwriter or a market maker for the securities.
Usually no brokerage commissions are paid by the Fund for such purchases.
Purchases of portfolio securities from underwriters include a commission or
concession paid by the issuer to the underwriter and the purchase price paid
to market makers for the securities may include the spread between the bid
and asked price. No brokerage commissions or concessions were paid by the
Fund during the 1995, 1996 and 1997 fiscal years.
Transactions are allocated to various dealers by the Fund's portfolio
managers in their best judgment. The primary consideration is prompt and
effective execution of orders at the most favorable price. Subject to that
primary consideration, dealers may be selected for research, statistical or
other services to enable the Manager to supplement its own research and
analysis with the views and information of other securities firms. Sales of
shares of the Fund and other funds in the Dreyfus Family of Funds by a
broker may be taken into consideration in allocating brokerage transactions.
Research services furnished by brokers through which the Fund effects
securities transactions may be used by the Manager in advising other funds
it advises and, conversely, research services furnished to the Manager by
brokers in connection with other funds the Manager advises may be used by
the Manager in advising the Fund. Although it is not possible to place a
dollar value on these services, it is the opinion of the Manager that the
receipt and study of such services should not reduce the overall expenses of
its research department.
The Fund anticipates that its annual portfolio turnover rate generally
will not exceed 300%. For the fiscal years ended March 31, 1996 and 1997,
the Fund's portfolio turnover rate was 165.50% and 415.69%, respectively.
The increase in the Fund's portfolio turnover rate in fiscal 1997 was
attributable to the restructuring of the Fund's portfolio and to the
volatile interest rate environment which necessitated more frequent
adjustments to the duration of the Fund's portfolio.
DETERMINATION OF NET ASSET VALUE
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "How to Buy Shares."
Valuation of Portfolio Securities. Substantially all of the Fund's
investments (excluding short-term investments) are valued each business day
by an independent pricing service (the "Service") approved by the Fund's
Board. Securities valued by the Service for which quoted bid prices in the
judgment of the Service are readily available and are representative of the
bid side of the market are valued at the mean between the quoted bid prices
(as obtained by the Service from dealers in such securities) and asked
prices (as calculated by the Service based upon its evaluation of the market
for such securities). Other investments (which constitute a majority of the
portfolio of securities) valued by the Service are carried at fair value as
determined by the Service, based on methods which include consideration of:
yields or prices of securities of comparable quality, coupon, maturity and
type; indications as to values from dealers; and general market conditions.
Short-term investments are not valued by the Service and are carried at
amortized cost, which approximates value. Other investments that are not
valued by the Service are valued at the average of the most recent bid and
asked prices in the market in which such investments are primarily traded,
or at the last sales price for securities traded primarily on an exchange.
In the absence of reported sales of investments traded primarily on an
exchange, the average of the most recent bid and asked prices is used. Bid
price is used when no asked price is available. Investments traded in
foreign currencies are translated to U.S. dollars at the prevailing rates of
exchange. Expenses and fees, including the management fee (reduced by the
expense limitation, if any), are accrued daily and are taken into account
for the purpose of determining the net asset value of Fund shares.
New York Stock Exchange Closings. The holidays (as observed) on which
the New York Stock Exchange is closed currently are: New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving and Christmas.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Dividends, Distributions
and Taxes."
Management believes that the Fund qualified as a "regulated investment
company" under the Code for the fiscal year ended March 31, 1997. The Fund
intends to continue to so qualify if such qualification is in the best
interests of its shareholders. As a regulated investment company, the Fund
will pay no Federal income tax on its net investment income and net realized
capital gains to the extent such income and gains are distributed to
shareholders in accordance with applicable provisions of the Code. The term
"regulated investment company" does not imply the supervision of management
or investment practices or policies by any government agency.
Ordinarily, gains and losses realized from portfolio transactions will
be treated as capital gain or loss. However, all or a portion of any gain
realized from the sale or other disposition of certain market discount bonds
will be treated as ordinary income under Section 1276 of the Code.
Any dividend or distribution from net realized long-term securities
gains (i.e., "capital gain distribution") paid shortly after an investor's
purchase may have the effect of reducing the aggregate net asset value of
his shares below the cost of his investment. Such a dividend or capital
gain distribution would be a return on investment in an economic sense,
although taxable as stated above. In addition, the Code provides that if a
shareholder holds shares of the Fund for six months (or shorter period as
the Internal Revenue Service may prescribe by regulation) and has received a
capital gain distribution with respect to such shares, any loss incurred on
the sale of such shares will be treated as long-term capital loss to the
extent of the capital gain distribution received.
Investment by the Fund in securities issued at a discount or providing
for deferred interest or for payment of interest in the form of additional
obligations could, under special tax rules, affect the amount, timing and
character of distributions to shareholders. For example, the Fund could be
required to recognize annually a portion of the discount (or deemed
discount) at which such securities were issued and to distribute such
portion in order to maintain its qualification as a regulated investment
company. In such case, the Fund may be required to dispose of securities
which it might otherwise have continued to hold in order to generate cash to
satisfy these distribution requirements.
PERFORMANCE INFORMATION
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "Performance
Information."
The Fund's current yield for the 30-day period ended March 31, 1997 was
6.39%. Current yield is computed pursuant to a formula which operates as
follows: The amount of the Fund's expenses accrued for the 30-day period is
subtracted from the amount of the dividends and interest earned (computed in
accordance with regulatory requirements) by the Fund during the period.
That result is then divided by the product of: (a) the average daily number
of shares outstanding during the period that were entitled to receive
dividends, and (b) the net asset value per share on the last day of the
period less any undistributed earned income per share reasonably expected to
be declared as a dividend shortly thereafter. The quotient is then added to
1, and that sum is raised to the 6th power, after which 1 is subtracted.
The current yield is then arrived at by multiplying the result by 2.
The Fund's average annual total return for the one, five and ten year
periods ended March 31, 1997 was 3.88%, 7.69% and 7.92%, respectively.
Average annual total return is calculated by determining the ending
redeemable value of an investment purchased with a hypothetical $1,000
payment made at the beginning of the period (assuming the reinvestment of
dividends and distributions), dividing by the amount of the initial
investment, taking the "n"th root of the quotient (where "n" is the number
of years in the period) and subtracting 1 from the result.
The Fund's total return for the period June 25, 1976 to March 31, 1997
was 544.06%. Total return is calculated by subtracting the amount of the
Fund's net asset value per share at the beginning of a stated period from
the net asset value per share at the end of the period (after giving effect
to the reinvestment of dividends and distributions during the period), and
dividing the result by the net asset value per share at the beginning of the
period.
INFORMATION ABOUT THE FUND
The following information supplements and should be read in conjunction
with the section in the Fund's Prospectus entitled "General Information."
Each Fund share has one vote and, when issued and paid for in
accordance with the terms of the offering, is fully paid and nonassessable.
Fund shares are of one class and have equal rights as to dividends and in
liquidation. Shares have no preemptive, subscription or conversion rights
and are freely transferable.
The Fund sends annual and semi-annual financial statements to all its
shareholders.
TRANSFER AND DIVIDEND DISBURSING AGENT, CUSTODIAN,
COUNSEL AND INDEPENDENT AUDITORS
Dreyfus Transfer, Inc., a wholly-owned subsidiary of the Manager, P.O.
Box 9671, Providence, Rhode Island 02940-9671, is the Fund's transfer and
dividend disbursing agent. Under a transfer agency agreement with the Fund,
the Transfer Agent arranges for the maintenance of shareholder account
records for the Fund, the handling of certain communications between
shareholders and the Fund and the payment of dividends and distributions
payable by the Fund. For these services, the Transfer Agent receives a
monthly fee computed on the basis of the number of shareholder accounts it
maintains for the Fund during the month, and is reimbursed for certain out-
of-pocket expenses. For the fiscal year ended March 31, 1997, the Fund paid
the Transfer Agent $277,997.
Mellon Bank, N.A. (the "Custodian"), the Manager's parent, One Mellon
Bank Center, Pittsburgh, Pennsylvania 15258, serves as custodian of the
Fund's investments. Under a custody agreement with the Fund, the Custodian
holds the Fund's securities and keeps all necessary accounts and records.
For its custody services, the Custodian receives a monthly fee based on the
market value of the Fund's assets held in custody and receives certain
securities transactions charges. For the period May 10, 1996 (effective
date of the custody agreement) through March 31, 1997, the Fund paid the
Custodian $55,807.
Stroock & Stroock & Lavan LLP, 180 Maiden Lane, New York, New York
10038-4982, as counsel for the Fund, has rendered its opinion as to certain
legal matters regarding the due authorization and valid issuance of the
shares being sold pursuant to the Fund's Prospectus.
Ernst & Young LLP, independent auditors, 787 Seventh Avenue, New York,
New York 10019, have been selected as the Fund's auditors.
APPENDIX
Description of certain Standard & Poor's Ratings Group ("S&P") and
Moody's Investors Service, Inc. ("Moody's") ratings:
S&P
Debt Ratings
AAA
Bonds rated AAA have the highest rating assigned to a debt obligation.
Capacity to pay interest and repay principal is extremely strong.
AA
Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the highest rated issues only in small degree.
A
Bonds rated A have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse effects
of changes in circumstances and economic conditions than bonds in higher
rated categories.
BBB
Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate
protection parameters, adverse economic conditions or changing circumstances
are more likely to lead to a weakened capacity to pay interest and repay
principal for bonds in this category than for bonds in higher rated
categories.
BB
Bonds rated BB have less near-term vulnerability to default than other
speculative bonds. However, they face major ongoing uncertainties or
exposure to adverse business, financial or economic conditions which could
lead to inadequate capacity to meet timely interest and principal payments.
B
Bonds rated B have a greater vulnerability to default but presently
have the capacity to meet interest payments and principal repayments.
Adverse business, financial or economic conditions would likely impair
capacity or willingness to pay interest and repay principal.
S&P's letter rating may be modified by the addition of a plus or a
minus sign, which is used to show relative standing within the major rating
categories, except in the AAA (Prime Grade) category.
Commercial Paper Ratings
The rating A is the highest rating and is assigned by S&P to issues
that are regarded as having the greatest capacity for timely payment.
Issues in this category are delineated with the numbers 1, 2 and 3 to
indicate the relative degree of safety. Paper rated A-1 indicates that the
degree of safety regarding timely payment is either overwhelming or very
strong. Those issues determined to possess overwhelming safety
characteristics are denoted with a plus (+) sign designation. Paper rated
A-1 must have the following characteristics: liquidity ratios are adequate
to meet cash requirements, long-term senior debt is rated "A" or better, the
issuer has access to at least two additional channels of borrowing, and
basic earnings and cash flow have an upward trend with allowance made for
unusual circumstances. Typically, the issuer's industry is well established
and the issuer has a strong position within the industry; the reliability
and quality of management are unquestioned.
Moody's
Debt Rating
Aaa
Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such
issues.
Aa
Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there may
be other elements present which make the long-term risks appear somewhat
larger than in Aaa securities.
A
Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may
be present which suggest a susceptibility to impairment sometime in the
future.
Baa
Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but certain
protective elements may be lacking or may be characteristically unreliable
over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
Ba
Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and therefore not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B
Bonds which are rated B generally lack characteristics of the desired
investment. Assurance of interest and principal payments or of maintenance
of other terms of the contract over any long period of time may be small.
Moody's applies the numerical modifiers 1, 2 and 3 to show relative
standing within the major rating categories, except in the Aaa category.
The modifier 1 indicates a ranking for the security in the higher end of a
rating category; the modifier 2 indicates a mid-range ranking; and the
modifier 3 indicates a ranking in the lower end of a rating category.
Commercial Paper Rating
The rating Prime-1 (P-1) is the highest commercial paper rating
assigned by Moody's. Issuers of P-1 paper must have a superior capacity for
repayment of short-term promissory obligations, and ordinarily will be
evidenced by leading market positions in well established industries, high
rates of return on funds employed, conservative capitalization structures
with moderate reliance on debt and ample asset protection, broad margins in
earnings coverage of fixed financial charges and high internal cash
generation, and well established access to a range of financial markets and
assured sources of alternate liquidity.
DREYFUS A BONDS PLUS, INC.
STATEMENT OF INVESTMENTS MARCH 31, 1997
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Principal
Bonds and Notes_96.7% Amount Value
_______ _______
Asset-Backed_7.2% ContiMortgage Home Equity Loan Trust,
Pass-Through Ctfs.,
Ser. 1996-3, Cl. A7, 8.04%, 2027..... $ 8,000,000 $ 8,135,000
The Money Store Trust,
Asset Backed Ctfs., Ser. 1996-D:
Cl. A-7, 7.11%, 2025.................. 16,000,000 15,556,800
Cl. A-16, 7.11%, 2028................. 7,640,466 7,548,542
UCFC Acceptance,
Home Equity Loan Pass-Through Ctfs.,
Ser. 1997-A1, Cl. A-6, 7.435%, 2024.. 9,686,000 9,607,301
_______
40,847,643
_______
Automotive_1.3% Chrysler,
Deb., 7.45%, 2097.................... 8,000,000 (a) 7,418,080
_______
Banking_16.2% BNY Capital I,
Gtd. Capital Securities, Ser. B, 7.97%, 2026 11,000,000 10,646,361
BankBoston Capital Trust II,
Gtd. Capital Securities, 7 3/4%, 2026. 13,000,000 (a) 12,106,250
Barnett Capital II,
Gtd. Capital Securities, 7.95%, 2026. 6,000,000 (a) 5,737,500
First Union Institutional:
Capital I,
Gtd. Capital Securities, 8.04%, 2026 17,000,000 16,512,151
Capital II,
Gtd. Capital Securities, 7.85%, 2027 10,000,000 (a) 9,475,000
Fleet Capital Trust II,
Gtd. Capital Securities, 7.92%, 2026. 10,000,000 9,581,210
J.P. Morgan & Co.,
Floating Rate Medium-Term Notes,
Ser. A, 4%, 2012..................... 10,000,000 (b) 9,756,000
State Street Institutional Capital A,
Gtd. Capital Securities, Ser. A, 7.94%, 2026 20,000,000 (a) 19,034,000
_______
92,848,472
_______
Brokerage_.9% Salomon,
Sr. Consumer Price Index-Linked Bonds,
3.65%, 2002.......................... 5,000,000 (b) 4,879,770
_______
Chemicals_1.4% Eastman Chemical,
Deb., 7.60%, 2027.................... 8,000,000 7,720,568
_______
Commercial Mortgage_21.2% Asset Securitization,
Commercial Mortgage Pass-Through Ctfs.,
Ser. 1996-MD VI, Cl. A7, 7.147%, 2026 23,000,000 (c) 22,148,281
Commercial Mortgage Acceptance,
Commercial Mortgage Pass-Through Ctfs.,
Ser. 1996-C2, Cl. C, 7.139%, 2023.... 8,619,000 (a,c) 8,392,751
DREYFUS A BONDS PLUS, INC.
STATEMENT OF INVESTMENTS (CONTINUED) MARCH 31, 1997
Principal
Bonds and Notes (continued) Amount Value
_______ _______
Commercial Mortgage (continued) DLJ Mortgage Acceptance,
Commercial Mortgage Pass-Through Ctfs.,
Ser. 1996-CF2:
Cl. A-2, 7.28%, 2021.................. $ 5,000,000 (a) $ 4,878,125
Cl. A-3, 7.38%, 2021.................. 3,000,000 (a) 2,926,875
Cl. B-1, 7.53%, 2021.................. 4,000,000 (a) 3,890,000
FDIC REMIC Trust,
Commercial Mortgage Pass-Through Ctfs.,
Ser.1996-C1:
Cl.1-B, 7 1/8%, 2026............................ 7,000,000 6,803,125
Cl.1-C, 7 1/4%, 2026 5,000,000 4,863,281
Cl.1-D, 7 1/4%, 2026............................ 10,000,000 9,595,313
GMAC Commercial Mortgage Securities,
Mortgage Pass-Through Ctfs., Ser. 1996-C1:
Cl. C, 7.43%, 2006.................... 5,000,000 4,929,687
Cl. D, 7.73%, 2006.................... 11,409,000 11,282,431
Cl. E, 7.86%, 2006.................... 3,105,000 2,951,691
Merrill Lynch Mortgage Investors,
Mortgage Pass-Through Ctfs.:
Ser. 1995-C3, Cl. C, 7.368%, 2025..... 4,980,000 (c) 4,880,400
Ser. 1996-C2, Cl. C, 6.96%, 2028...... 10,000,000 9,521,875
Resolution Trust,
Commercial Mortgage Pass-Through Ctfs.:
Ser. 1994-C2, Cl. D, 8%, 2025......... 10,165,417 10,222,597
Ser. 1995-C1, Cl. A2B, 6.55%, 2027.... 835,007 832,659
Ser. 1995-C2, Cl. C, 7%, 2027......... 6,626,365 6,375,806
Structured Asset Securities,
Mortgage Pass-Through Ctfs.,
Ser. 1996-C3, Cl. B, 7 1/8%, 2030..... 7,000,000 (a) 6,899,375
_______
121,394,272
_______
Consumer/Finance_1.4% MBNA Capital B,
Gtd. Floating Rate Capital Securities,
Ser. B, 6.363%, 2027................. 8,000,000 (c) 7,930,944
_______
Foreign_6.7% Bangkok Bank PLC,
Sub. Notes, 8 3/8%, 2027............. 11,000,000 (a) 10,562,937
United Mexican States,
Floating Rate Notes, 7 5/8%, 2001.... 18,000,000 (a,c) 18,225,000
Wharf International Finance Ltd.,
Gtd. Notes, Ser. A, 7 5/8%, 2007..... 10,000,000 (a) 9,665,900
_______
38,453,837
_______
DREYFUS A BONDS PLUS, INC.
STATEMENT OF INVESTMENTS (CONTINUED) MARCH 31, 1997
Principal
Bonds and Notes (continued) Amount Value
_______ _______
Industrial_1.3% GATX Capital,
Medium-Term Notes, Ser. B, 9 1/2%, 2002 $ 5,000,000 $ 5,447,370
Parker-Hannifin,
Deb., 9 3/4%, 2021................... 2,000,000 2,185,730
_______
7,633,100
_______
Insurance_6.1% AFC Capital Trust I,
Gtd. Capital Securities, 8.207%, 2027.......... 15,000,000 (a) 14,975,670
American General Institutional Capital B,
Gtd. Capital Securities, Ser. B, 8 1/8%, 2046 10,000,000 (a) 9,687,500
NAC Re,
Notes, 8%, 1999...................... 5,000,000 5,106,700
Orion Capital,
Sr. Notes, 9 1/8%, 2002.............. 5,000,000 5,378,205
_______
35,148,075
_______
Oil and Gas_3.1% Halliburton,
Notes, 6 3/4%, 2007.................. 18,000,000 (d) 17,448,102
Maxus Energy,
Sinking Fund Deb., 11 1/4%, 2013..... 184,000 189,520
_______
17,637,622
_______
Real Estate_.9% United Dominion Realty Trust,
Notes, 7 1/4%, 2007.................. 5,000,000 4,876,545
_______
Residential Mortgage_1.1% Collateralized Mortgage Obligation Trust 9,
Cl. C (Collateralized by
GNMA Pass-Through Ctfs.),
7 3/4%, 2012......................... 336,480 339,354
DLJ Acceptance Trust 1,
Collateralized Mortgage Obligation,
Ser. 1989-1, Cl. 1-F (Collateralized by
GNMA Pass-Through Ctfs. and the
Collateral Proceeds Account), 11%, 2019 208,884 218,865
FHA Project Loan Ctfs., Ser. Pool No. 6
(Reilly Mortgage Group), 7.43%, 2022. 6,010,460 5,938,148
_______
6,496,367
_______
Utilities/Electric_.9% National Rural Utilities Cooperative Finance,
Collateral Trust Bonds, 7.30%, 2006.. 5,000,000 4,983,270
_______
Utilities/Telephone_4.9% BellSouth Capital Funding,
Deb., 6.04%, 2001.................... 12,000,000 (e) 11,688,840
Wisconsin Bell,
Deb., 6.35%, 2006.................... 17,000,000 (f) 16,140,106
_______
27,828,946
_______
DREYFUS A BONDS PLUS, INC.
STATEMENT OF INVESTMENTS (CONTINUED) MARCH 31, 1997
Principal
Bonds and Notes (continued) Amount Value
_______ _______
U.S. Government Agency/
Mortgage Backed_17.8% Government National Mortgage Association I:
7%, 6/15/2008......................... $ 162,448 $ 161,281
7 1/2%, 5/15/2027..................... 54,000,000 (g) 52,987,500
9 1/2%, 11/15/2017.................... 9,221,662 9,950,727
Project Loan,
7 1/2%, 12/15/2029.................. 4,679,678 4,577,287
Government National Mortgage Association REMIC Trust,
Gtd. REMIC Pass-Through Securities:
Ser. 1997-2, Cl. K, 7 1/2%, 1/20/2024... 11,259,000 10,840,053
Ser. 1997-4, Cl. G, 7 1/2%, 11/16/2024.. 11,500,000 11,001,015
Student Loan Marketing Association,
Consumer Price Index-Indexed Notes, 2.90%, 2000 12,500,000 (b) 12,368,875
_______
101,886,738
_______
U.S. Government_4.3% U.S. Treasury Notes,
6 1/4%, 3/31/1999........................ 25,000,000 24,803,750
_______
TOTAL BONDS AND NOTES
(cost $564,635,102).................. $552,787,999
=======
Short-Term Investments_6.6%
U.S. Government Agency; Federal Home Loan Banks,
6.45%, 4/1/1997
(cost $37,765,000)................... $ 37,765,000 $ 37,765,000
=======
TOTAL INVESTMENTS (cost $602,400,102)....................................... 103.3% $590,552,999
==== =======
LIABILITIES, LESS CASH AND RECEIVABLES...................................... (3.3%) $ (18,972,720)
==== =======
NET ASSETS.................................................................. 100.0% $571,580,279
==== =======
</TABLE>
Notes to Statement of Investments:
(a) Securities exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At March 31,
1997, these securities amounted to $143,874,963 or 25.2% of net assets.
(b) Variable rate security-base interest rate shown-adjustment
to interest rate linked to the Consumer Price Index.
(c) Variable rate security-interest rate subject to periodic change.
(d) Reflects date security can be redeemed at holders' option; the
stated maturity date is 2/1/2027.
(e) Reflects date security can be redeemed at holder's option; the
stated maturity date is 11/15/2026.
(f) Reflects date security can be redeemed at holders' option; the
stated maturity date is 12/1/2026.
(g) Purchased on a forward commitment basis.
SEE NOTES TO FINANCIAL STATEMENTS.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
DREYFUS A BONDS PLUS, INC.
STATEMENT OF ASSETS AND LIABILITIES MARCH 31, 1997
Cost Value
-------- --------
ASSETS: Investments in securities_See Statement of Investments $602,400,102 $590,552,999
Cash....................................... 1,906,292
Receivable for investment securities sold.. 52,913,904
Interest receivable........................ 5,868,712
Receivable for shares of Common Stock subscribed 208,205
Prepaid expenses and other assets.......... 53,930
--------
651,504,042
--------
LIABILITIES: Due to The Dreyfus Corporation and affiliates 420,124
Payable for investment securities purchased 77,167,774
Payable for shares of Common Stock redeemed 2,208,646
Interest payable........................... 2,046
Accrued expenses........................... 125,173
--------
79,923,763
--------
NET ASSETS.................................................................. $571,580,279
========
REPRESENTED BY: Paid-in capital............................ $573,818,789
Accumulated undistributed investment income_net 6,127,083
Accumulated net realized gain (loss) on investments 3,481,510
Accumulated net unrealized appreciation (depreciation)
on investments_Note 4.................... (11,847,103)
--------
NET ASSETS.................................................................. $571,580,279
========
SHARES OUTSTANDING
(100 million shares of $.01 par value Common Stock authorized).............. 40,439,539
NET ASSET VALUE, offering and redemption price per share.................... $14.13
========
SEE NOTES TO FINANCIAL STATEMENTS.
DREYFUS A BONDS PLUS, INC.
STATEMENT OF OPERATIONS YEAR ENDED MARCH 31, 1997
INVESTMENT INCOME
INCOME Interest Income............................ $ 42,280,458
EXPENSES: Management fee_Note 3(a)................... $ 3,885,766
Shareholder servicing costs_Note 3(b)...... 1,545,986
Custodian fees_Note 3(b)................... 61,454
Directors' fees and expenses_Note 3(c)..... 56,782
Professional fees.......................... 53,450
Registration fees.......................... 51,179
Prospectus and shareholders' reports....... 27,376
Interest_Note 2............................ 23,686
Miscellaneous.............................. 8,436
_______
Total Expenses....................... 5,714,115
_______
INVESTMENT INCOME_NET....................................................... 36,566,343
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS_Note 4:
Net realized gain (loss) on investments.... $ 8,631,964
Net unrealized appreciation (depreciation) on investments (22,130,009)
_______
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS...................... (13,498,045)
_______
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $ 23,068,298
=======
SEE NOTES TO FINANCIAL STATEMENTS.
DREYFUS A BONDS PLUS, INC.
STATEMENT OF CHANGES IN NET ASSETS
Year Ended Year Ended
March 31, 1997 March 31, 1996
________ ________
OPERATIONS:
Investment income_net................................................... $ 36,566,343 $ 36,916,840
Net realized gain (loss) on investments................................. 8,631,964 18,686,437
Net unrealized appreciation (depreciation) on investments............... (22,130,009) 9,773,168
-------- --------
Net Increase (Decrease) in Net Assets Resulting from Operations....... 23,068,298 65,376,445
-------- --------
NET EQUALIZATION CREDITS (DEBITS)_Note 1(e)................................. (142,308) 164,551
-------- --------
DIVIDENDS TO SHAREHOLDERS FROM:
Investment income_net................................................... (36,573,464) (37,132,047)
-------- --------
CAPITAL STOCK TRANSACTIONS:
Net proceeds from shares sold........................................... 188,296,554 194,660,390
Dividends reinvested.................................................... 31,341,242 31,821,743
Cost of shares redeemed................................................. (232,961,296) (195,480,199)
-------- --------
Increase (Decrease) in Net Assets from Capital Stock Transactions..... (13,323,500) 31,001,934
-------- --------
Total Increase (Decrease) in Net Assets........................... (26,970,974) 59,410,883
NET ASSETS:
Beginning of Period..................................................... 598,551,253 539,140,370
-------- --------
End of Period........................................................... $ 571,580,279 $ 598,551,253
======== ========
Undistributed investment income_net......................................... $ 6,127,083 $ 6,276,512
-------- --------
Shares Shares
-------- --------
CAPITAL SHARE TRANSACTIONS:
Shares sold............................................................. 13,245,473 13,495,937
Shares issued for dividends reinvested.................................. 2,202,148 2,215,494
Shares redeemed......................................................... (16,381,726) (13,549,784)
-------- --------
Net Increase (Decrease) in Shares Outstanding......................... (934,105) 2,161,647
======== ========
SEE NOTES TO FINANCIAL STATEMENTS.
DREYFUS A BONDS PLUS, INC.
FINANCIAL HIGHLIGHTS
Contained below is per share operating performance data for a share of
Common Stock outstanding, total investment return, ratios to average net
assets and other supplemental data for each period indicated. This
information has been derived from the Fund's financial statements.
Year Ended March 31,
______________________________________________________________
PER SHARE DATA: 1997 1996 1995 1994 1993
---- ---- ---- ---- ----
Net asset value, beginning of period......... $14.47 $13.75 $14.38 $15.43 $14.35
---- ---- ---- ---- ----
Investment Operations:
Investment income_net........................ .88 .92 .94 .98 1.05
Net realized and unrealized gain (loss)
on investments............................. (.34) .73 (.56) (.46) 1.29
---- ---- ---- ---- ----
Total from Investment Operations............. .54 1.65 .38 .52 2.34
---- ---- ---- ---- ----
Distributions:
Dividends from investment income_net......... (.88) (.93) (.94) (.99) (1.05)
Dividends from net realized gain on investments -- -- (.07) (.58) (.21)
---- ---- ---- ---- ----
Total Distributions.......................... (.88) (.93) (1.01) (1.57) (1.26)
---- ---- ---- ---- ----
Net asset value, end of period............... $14.13 $14.47 $13.75 $14.38 $15.43
==== ==== ==== ==== ====
TOTAL INVESTMENT RETURN.......................... 3.88% 12.12% 3.01% 3.09% 17.09%
RATIOS/SUPPLEMENTAL DATA:
Ratio of expenses to average net assets...... .96% .93% .99% .90% .93%
Ratio of net investment income
to average net assets...................... 6.12% 6.32% 6.89% 6.30% 7.07%
Portfolio Turnover Rate...................... 415.69% 165.50% 172.60% 93.67% 81.15%
Net Assets, end of period (000's omitted).... $571,580 $ 598,551 $ 539,140 $ 593,615 $ 574,431
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
DREYFUS A BONDS PLUS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1_SIGNIFICANT ACCOUNTING POLICIES:
Dreyfus A Bonds Plus, Inc. (the "Fund") is registered under the
Investment Company Act of 1940 ("Act") as a diversified open-end management
investment company. The Fund's investment objective is to provide investors
with the maximum amount of current income to the extent consistent with the
preservation of capital and the maintenance of liquidity. The Dreyfus
Corporation ("Manager") serves as the Fund's investment adviser. The Manager
is a direct subsidiary of Mellon Bank, N.A. ("Mellon"). Premier Mutual Fund
Services, Inc. is the distributor of the Fund's shares, which are sold to the
public without a sales charge.
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which may require the use of management
estimates and assumptions. Actual results could differ from those estimates.
(a) Portfolio valuation: Investments in securities (excluding short-term
investments and U.S. Government obligations) are valued each business day by
an independent pricing service ("Service") approved by the Board of
Directors. Investments for which quoted bid prices are readily available and
are representative of the bid side of the market in the judgment of the
Service are valued at the mean between the quoted bid prices (as obtained by
the Service from dealers in such securities) and asked prices (as calculated
by the Service based upon its evaluation of the market for such securities).
Other investments (which constitute a majority of the portfolio securities)
are carried at fair value as determined by the Service, based on methods
which include consideration of: yields or prices of securities of comparable
quality, coupon, maturity and type; indications as to values from dealers;
and general market conditions. Investments in U.S. Government obligations are
valued at the mean between quoted bid and asked prices. Investments
denominated in foreign currencies are translated to U.S. dollars at the
prevailing rates of exchange. Short-term investments are carried at amortized
cost, which approximates value.
(b) Securities transactions and investment income: Securities
transactions are recorded on a trade date basis. Realized gain and loss from
securities transactions are recorded on the identified cost basis. Interest
income, including, where applicable, amortization of discount on investments,
is recognized on the accrual basis.
(c) Dividends to shareholders: Dividends are recorded on the ex-dividend
date. Dividends from investment income-net are declared and paid monthly.
Dividends from net realized capital gain are normally declared and paid
annually, but the Fund may make distributions on a more frequent basis to
comply with the distribution requirements of the Internal Revenue Code. To
the extent that net realized capital gain can be offset by capital loss
carryovers, if any, it is the policy of the Fund not to distribute such gain.
On March 31, 1997, the Board of Directors declared a cash dividend of
$.075 per share from undistributed investment income-net, payable on April 1,
1997 (ex-dividend date), to shareholders of record as of the close of
business on March 31, 1997.
(d) Federal income taxes: It is the policy of the Fund to continue to
qualify as a regulated investment company, if such qualification is in the
best interests of its shareholders, by complying with the applicable
provisions of the Internal Revenue Code, and to make distributions of taxable
income sufficient to relieve it from substantially all Federal income and
excise taxes.
(e) Equalization: The Fund follows the accounting practice known as
"equalization" by which a portion of the amounts received on issuances and
the amounts paid on redemptions of Fund shares (equivalent, on a per share
basis, to the amount of distributable investment income-net on the date of
the transaction) is allocated to undistributed investment income-net so that
undistributed investment income-net per share is unaffected by Fund shares
issued or redeemed.
DREYFUS A BONDS PLUS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 2_BANK LINE OF CREDIT:
The Fund may borrow up to $20 million for leveraging purposes under a
short-term unsecured line of credit and participates with other
Dreyfus-managed funds in a $100 million unsecured line of credit primarily to
be utilized for temporary or emergency purposes, including the financing of
redemptions. Interest is charged to the Fund at rates which are related to
the Federal Funds rate in effect at the time of borrowings. At March 31,
1997, the Fund had no outstanding borrowings under either line of credit.
The average daily amount of borrowings outstanding under both
arrangements during the period ended March 31, 1997 was approximately
$422,000, with a related weighted average annualized interest rate of 5.61%.
The maximum amount borrowed at any time during the period ended March 31,
1997 was $9,550,000.
NOTE 3_MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES:
(a) Pursuant to a management agreement ("Agreement") with the Manager,
the management fee is computed at the annual rate of .65 of 1% of the value
of the Fund's average daily net assets and is payable monthly. The Agreement
provides that if in any full fiscal year the aggregate expenses of the Fund,
exclusive of taxes, interest on borrowings, brokerage commissions and
extraordinary expenses, exceed 1 1/2% of the value of the Fund's average net
assets, the Fund may deduct from the payments to be made to the Manager, or
the Manager will bear, the amount of such excess expenses. There was no
expense reimbursement for the period ended March 31, 1997.
(b) Under the Shareholder Services Plan, the Fund reimburses Dreyfus
Service Corporation, a wholly-owned subsidiary of the Manager, an amount not
to exceed an annual rate of .25 of 1% of the value of the Fund's average
daily net assets for certain allocated expenses of providing personal
services and/or maintaining shareholder accounts. The services provided may
include personal services relating to shareholder accounts, such as answering
shareholder inquiries regarding the Fund and providing reports and other
information, and services related to the maintenance of shareholder accounts.
During the period ended March 31, 1997, the Fund was charged an aggregate of
$1,007,283 pursuant to the Shareholder Services Plan.
The Fund compensates Dreyfus Transfer, Inc., a wholly-owned subsidiary of
the Manager, under a transfer agency agreement for providing personnel and
facilities to perform transfer agency services for the Fund. Such
compensation amounted to $277,997 during the period ended March 31, 1997.
The Fund compensates Mellon under a custody agreement to provide
custodial services for the Fund. During the period ended March 31, 1997,
$55,807 was charged by Mellon pursuant to the custody agreement.
(c) Each director who is not an "affiliated person" as defined in the Act
receives from the Fund an annual fee of $2,500 and an attendance fee of $500
per meeting. The Chairman of the Board receives an additional 25% of such
compensation.
NOTE 4_SECURITIES TRANSACTIONS:
The aggregate amount of purchases and sales (including paydowns) of
investment securities, excluding short-term securities, during the period
ended March 31, 1997, amounted to $2,478,012,721 and $2,449,750,034,
respectively.
At March 31, 1997, accumulated net unrealized depreciation on investments
was $11,847,103, consisting of $1,711,347 gross unrealized appreciation and
$13,558,450 gross unrealized depreciation.
At March 31, 1997, the cost of investments for Federal income tax
purposes was substantially the same as the cost for financial reporting
purposes (see the Statement of Investments).
DREYFUS A BONDS PLUS, INC.
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Shareholders and Board of Directors
Dreyfus A Bonds Plus, Inc.
We have audited the accompanying statement of assets and liabilities of
Dreyfus A Bonds Plus, Inc., including the statement of investments, as of
March 31, 1997, and the related statement of operations for the year then
ended, the statement of changes in net assets for each of the two years in
the period then ended and financial highlights for each of the years
indicated therein. These financial statements and financial highlights are
the responsibility of the Fund's management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements and financial highlights. Our procedures included
verification by examination of securities held by the custodian as of March
31, 1997 and confirmation of securities not held by the custodian by
correspondence with others. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the financial
position of Dreyfus A Bonds Plus, Inc. at March 31, 1997, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each
of the indicated years, in conformity with generally accepted accounting
principles.
[ERNST & YOUNG LLP signature logo]
New York, New York
May 6, 1997
